Governance and the Eurozone: Framing Questions

by Kenneth Anderson

Last fall, I posted about possible governance effects of eurozone crisis on the EZ and, more broadly, the EU.  I raised questions not as an expert on European institutions, law, or governance, but as someone with a long interest in governance and legitimacy questions for the international system.  They elicited some very interesting responses, particularly from University of Connecticut’s Peter Lindseth (who blogs on these topics at Eutopia).  I also collected a number of noteworthy responses by email from other EU law scholars.

During the last few months, the sense of crisis has been so overwhelming, and the serial responses so rapid-fire, outside international economic law observers like me haven’t been able to to do much more than, well, monitor the Twitter feed.  Without wanting to say that the crisis has passed – it hasn’t – the pace of market events has eased somewhat for the moment, and perhaps now is a better moment to ask questions about the implications and meaning, if any, of the EZ crisis for governance of the EU.  Over the next few months, I propose to do that, and hope to persuade both fellow OJers with an interest in economic law and governance issues to weigh in – as well interested outside experts in law, economics and economic law, and governance both generally and the EU specifically.  I have general views on governance, to be sure, but in this question of the EU, I do not hold myself out as expert and see my role more as facilitator trying to frame questions for discussion.

I’d like to spark more discussion of international economic law, governance, international organization, and other such topics here at OJ.  I plan to blog much less here about national security and related questions during this upcoming year, and much more about these topics.  Feel free to raise issues in the comments, email me directly, or to offer responses at other blogs and forums to which I can link.  Meanwhile, what kinds of categories/questions might need exploring?  A few possibilities, no special order:

  • Why is a crisis in the EZ a question of governance of the EZ at all – much less the EU?  Isn’t the euro just an economic and business tool, hugely useful in promoting efficiencies across the EZ, but not more than that?  The only relevant governance questions are those related to the economic, financial, and banking governance of specific EZ institutions, so why try to make it out as broader than that?  In any case, the “governance” issues involved are all essentially technical ones belonging to economists and finance specialists.
  • What is the role of lawyers or legal academic in addressing the EZ crisis?  One possible answer is that it is surely very limited.  The role of lawyers is no more than that of “scribe,” putting into words policies that are necessarily established by other kinds of experts or by political actors.  Governance of the EZ lies in the hands of technocrats in economics and finance, or else in the hands of political leadership doing purely political things.  Lawyers simple give expression to arrangements established elsewhere.  What independent analytic role do lawyers or legal academics have?
  • If lawyers have anything to offer beyond services as scribes, it is in a role “external” to the formation of the “best” policy, yes? No?  Lawyers can read the words of treaties, agreements, court cases, etc., that refer to the governance structures that are in place at this moment.  They might find limiting language (e.g., no bailouts of governments) or come up with enabling language or interpretations of governance documents.  But this role is “external” to the formation of best policy, either preventing or permitting on the basis of current governance arrangements.  It does not help analytically to determine the optimal policy.
  • What is the role of legitimacy, trust, and shared expectations in channeling the crisis, responding to it, and in the landscape that succeeds it?  And is this not an area of peculiar analytic expertise of lawyers and legal academics, given that law shapes institutional structures that markets and market participants either trust or not?  Those institutional structures shape, constrain, or enable the legitimacy of the polices dreamed up by other kinds of experts – but without which, the policies cannot succeed, either with the markets or with the European populations that must live with them.
  • In what ways, if any, does a Europe much more divided by its economic possibilities, much more visibly unequal across national borders, discover that its governance structures are altered, both at the national and EU level?  Will movement of goods, capital, and people remain as mobile as before?  Capital controls by countries facing the outflow of banking deposits, from Greece to Germany?  What about people?  Are there circumstances in which comparatively destitute southern Europeans move to richer countries – what about competition for jobs, but also what about welfare benefits?
  • Is economic governance of the EZ truly divorced from non-economic governance of the EU?  If an argument for the euro was that it was an essential part of the glue of the European project, in good historical materialist fashion laying the economic base for superstructural institutions, doesn’t that imply the opposite if the glue dissolves?   What might this mean, if anything, for such institutions as the ECJ or the ECtHR and their role in “values” governance of the EU?
  • Does the EZ crisis portend changes in the role of the EU as such in the wider world?  Reduced funding for foreign assistance by the EU and national governments and ever-more straitened national defense budgets? How might it affect the EU and its national governments’ relations with China (and Asia more broadly)?

There are other categories of questions, I’m sure, and I would be most interested in hearing them and adding them to the list for discussion.  But these are some that occur to me as someone who studies governance in the international community generally.  I hope we can explore them over the next few months.

4 Responses

  1. I don’t have time to respond in detail at the moment, but I would just like to point out one story. Apparently, the reason why David Cameron played hardball in the way that he did during last month’s European Council summit is that mr. Legal, the Head of the Council’s Legal Service, had explained to him that a Treaty with 26 Member States would be very difficult. Cameron took from that that it would not happen, and was thus blind-sighted when the negotiations quickly turned to that option.

    (What Cameron heard was that it was essentially impossible, and what Legal said in the meeting the next day was that it was not his preferred option, but that he would find a way to get it done if he had to.)

  2. Ken,

    I’m thrilled to hear that you will be blogging much more on international economic law issues.  That is one of my new year’s resolutions as well.  


  3. At the risk of creating identity confusion between two Kenneths I thought I might offer some reflections on why the Eurozone crisis deserves to be analyzed as a governance issue and particularly from the perspective of public law.
    Why is this a ‘governance’ issue?
    A useful starting point is to think about the discourse which has surrounded reforms to EU economic governance in the wake of the crisis. There has been a lot of talk about the need for the ‘Community Method’ to makes its presence felt in this area. Analysts of EU governance have tended to view the last decade as a period of experimentation with modes and styles of governance beyond the traditional model of judicial and legislative governance. Indeed, economic policy coordination – as emulated in the employment and social spheres through the open method of coordination – has largely been understood as a more intergovernmental/transgovernmental form of governance. The mechanisms of monitoring and surveillance associated with economic policy coordination have typically been described as ‘soft’ while the ‘harder’ mechanisms for fiscal surveillance have been viewed as difficult to put in practice.
    The emerging new economic governance architecture appears to ascribe a much more central role to supranational institutions like the European Commission and the European Court of Justice in monitoring and enforcing fiscal discipline. The adoption of the ‘six pack’ of legislative measures plays with the metaphor of a more muscular response at EU level in ways that places emphasis not only on the role of the Commission as the initiator of legislative responses but also the alliance between the Commission and the European Parliament in toughening up the legislative bargain.
    Yet despite the apparent manifestations of the Community Method as a process for adopting a legislative response, the new economic governance architecture has not abandoned policy coordination as a technique of governance. Indeed, we can see both the diffusion of policy coordination – its use to control macroeconomic imbalances – and increased coordination of coordination – the ‘European Semester’ as a framework for streamlining fiscal and economic policy coordination.
    All of which raises important questions as to the extent of the delegation of powers to supranational institutions as envisaged by a model of governance through the Community Method and its relationship to a variety of forms of executive governance given institutional expression in a range of intergovernmental forums – the European Council, the Euro Group, Euro Summits, the Council of Ministers – and infranational structures like the Economic Policy Committee. Not only is the crisis an issue of governance it is about the institutional design of the governance architecture.
    What’s Law Got to Do With It?
    There are good reasons for public lawyers to analyze EU economic governance.

    In the work of public lawyers like Terence Daintith and Tony Prosser there is a rich public law tradition that sought to consider the constitutional position of the executive in domestic economic policy-making. The delegation of powers of budgetary surveillance to the Commission and the sorts of domestic changes being demanded in return for EU and IMF support to countries like Greece, Ireland and Portugal highlights the extent of external influence on what used to be a key sovereign domain of the national executive.
    The domestic constitutional level is also a specific site for EU influence with the fiscal compact suggesting that Member States incorporate the kind of constitutional debt brake applied in Germany to other European states.
    The domestic constitutional level is also a context shaping the modalities of the European response. The need to reform the treaties to make provision for a permanent European Stability Mechanism was driven by anxieties as to compliance of the temporary mechanism with the conditions laid down by the German Constitutional Court as to the constitutionality of the Lisbon Treaty ratification. The German Constitutional Court has also demanded domestic parliamentary safeguards to control the bailout funds. The European Union Act 2011 creates new requirements for a referendum in the UK on treaty change in a way that casts a shadow over future treaty negotiations.
    The issues surrounding the adoption of a new treaty for the EU 27 or EU26 have highlighted the very important role to be played by EU lawyers in looking for potential solutions and raising potential problems with this form of enhanced cooperation between groups of states.
    At a more conceptual level, legal scholars interested in new forms of governance or experimental governance have often suggested that there is a transformation in law underway driven by the limits of traditional constitutionalism and instrumental legislative intervention. The emerging economic governance architecture is an important testing ground for these sorts of claims.

    The Relationship Between Economic and Social Governance
    While there is an apparent intensification of economic governance in the EU, social policy coordination has been left in a state of flux. In the previous decade the EU experimented with the use of the open method of coordination as a means of Europeanizing domestic policies on social protection and social exclusion. The austerity measures adopted by states in the wake of the banking and debt crisis has real social consequences. And yet the EU has no clear vision as to whether there is a need for continuing social policy coordination. The mechanisms for fiscal policy coordination do not appear to be oriented towards any analysis of the social consequences of fiscal contraction. It is perhaps not too dramatic to argue that there is a crisis in EU social governance that is not just at the instrumental level of the future of the social OMC but at a deeper justificatory level – what role can and should the EU play in the social domain and how has its traditional justifications for intervention been affected by the economic crisis?
    These are some initial thoughts and reactions to the questions you have posed. I look forward to seeing the discussion develop.
    Kenneth A. Armstrong
    Queen Mary University of London

  4. Professor Armstrong, vive les Kenneths!  Thanks very much for this thoughtful response, which I am going to put up onto the main page.

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