On 6 February 2012, Yves Bertoncini participated in a conference on European economic governance organized by Egmont – Royal Institute for International Relations. This Policy Brief is based on his intervention at the conference. The author pleads for a more encompassing form of EMU governance, which should be accompanied by a clarification of its democratic dimension

Bertoncini, Yves

Archive of European Integration

   EGMONT Royal Institute for International Relations No. 2 June 2011 No. 7 February 2012 The politics of  the “EMU governance” Yves Bertoncini   The “politics of the Economic and Monetary Union governance” is one of the key dimensions to take into account so as to understand what could be done in the short run to face the EMU crisis, but also to improve the functioning of the eurozone, and of the EU at large, in the medium and long runs. The “Studia Diplomatica” issue recently published by Egmont and referred to by Philippe de Schoutheete reminds us that substantial changes were already introduced in the EMU governance. To look at what could come next, it’s essential to consider the broad picture of the “politics” of this governance, which supposes in particular to consider its legitimacy. This will lead me to a twofold analysis and a total of five remarks:  the three first remarks focusing on the economic policies to be implemented -dealing with the “output legitimacy” of the EMU governance;  the 4th and 5th remarks treating the functioning of the EMU governance as regards Member States and national democracies – i.e. its “input legitimacy”. 1. The need for a more global « economic governance »  My first remarks aim to state that, now that the EU have adopted structuring decisions on aid packages and reinforced budgetary discipline (with the new treaty), three major operational perspectives should be promoted as regards the economic governance of the EMU. 1.1. A couple “solidarity versus responsibility” further deepened? The EMU governance evolved a lot in the last three years, from the “no bail out clause” of the Maastricht treaty to the European On 6 February 2012, Yves Bertoncini participated in a conference on European economic governance organized by Egmont – Royal Institute for International Relations. This Policy Brief is based on his intervention at the conference. The author pleads for a more encompassing form of EMU governance, which should be accompanied by a clarification of its democratic dimension.     EGMONT Royal Institute for International Relations  2  Financial Stability Fund and then the European Stability Mechanism, to be ratified and put in place. These major steps were necessary but, as they were not planed, and even theoretically and legally excluded, their adoption was very costly in political and economic terms.  In the short and medium run, the question is now:  should we go further in this direction, with more solidarity between the Member States of the EMU and more control on national budgetary and economic policies? More concretely, is the new Treaty recently adopted, and in particular its 2nd part devoted to a “fiscal compact”, a compensation for the solidarity already granted or, on the contrary, a pre-requisite for more solidarity in the future?  In this second perspective, the launch of “Eurobonds” or “Eurobills” to finance new debts in common, or the adoption of a “redemption pact” on past debts above the 60% of GDP ceiling, would be welcome. But apart from the technical modalities to be selected, the political challenge is to know how the EMU governance could control more closely and “ex-ante” the design of national budgets and, more broadly, the definition of national economic and social policies. It is naturally very difficult to know how the EU could go much further in this direction – I will come back to this a bit later. 1.2. A broader and sounder monitoring and supervision  Dealing with the monitoring of national economies should naturally lead to considerer two other major developments to promote in terms of governance. The first political development is to monitor not only budgetary deficits, but also “macro-economic imbalances”. The recent crisis has shown that the private debt has to be monitored much better – after all, Ireland and Spain had respected very well the “Stability and Growth Pact”. The “six pack” reform introduced the idea that global macro-economic factors, such as productivity gaps or current account deficits/surpluses, should also be monitored better. But the concrete tools and processes to monitor such imbalances remain to be put in place: this is a major challenge in the short and medium run. The other field in which a reinforced supervision should be promoted is naturally the financial one: it’s indeed a financial crisis started in 2008 which is at the origin of the turmoil we are all confronted with; and the EU is not only facing a “sovereign debt crisis”, but also a “banking crisis”. To prevent other crisis of this kind, the EU must then improve the efforts already made in favor of more rigorous financial norms and practices, as well as in favor of a more integrated financial supervision – in an effort to establish what the Bruegel “think tank” calls a “banking federation”.  1.3. The EU ability to produce growth: a new “package” to be defined Last but not least, the “EMU governance” should naturally give much more room to the promotion of growth, so as to counterbalance the impact of the austerity measures and norms recently adopted. This priority has rightly been mentioned by Didier Reynders in his keynote speech, as by more and more observers and actors. The challenge is not to limit the effect of the EU austerity measures or to coordinate better national policies so that they could produce more growth: it’s rather to exploit the real added value of the EU as regards growth, as     EGMONT Royal Institute for International Relations  3  it was done with the adoption of the famous “Delors packages”. It happens that, after the emergencies of 2010 and 2011, 2012 will be a key year on this field, with three main issues to be treated, as stressed by the recent declaration of Notre Europe steering committee: deepening further the internal market, 20 years after the “1992 objective”; adopting a new “multiannual financial framework” combining support for solidarity measures and funding for transport, energy and communication infrastructures of common European interest; finally, issuing “euro project bonds” designed to fund future spending, primarily in the infrastructure and environment fields. Here again, apart from the technical choices finally made, the key point is to put growth much higher on the agenda of the EMU governance in the coming months and years. 2. Clarifying the democratic dimension of the EMU governance I would like to make two other remarks focusing on the political dimension of the “EMU governance”, and more precisely its democratic one. To sum them up, I would say: what should the EU do vis-à-vis its Member States? And who should intervene at the EU’s level so as to “govern” the EMU? 2.1. The scope of the EMU governance: a distinction between heterogeneous approaches  The treatment of the Greek crisis and the recent adoption of a new Treaty can modify sharply the way the EU interventions are perceived in the Member States, with high political costs to be paid. It is then all the more necessary to distinguish clearly between three different political approaches. First approach: the situation of the “countries under programs” (Greece, Ireland and Portugal), in which the EU acts as (and alongside) the IMF, and can set its conditions. It is important to underline that the situation of these countries is very specific: it’s because they lost de facto their sovereignty, due to their excessive dependence on external creditors, that they should now rely on EU’s aid and implement the austerity programs they agreed on with the EU. Second approach: the EU control on national budgets, as put in place by the reformed “Stability and Growth Pact” and the new Treaty. This control allows the EU to impose sanctions on the Member States facing severe deficits they are reluctant or unable to reduce; it could soon intervene ex ante, when the budgets are discussed, and not only ex post, when the deficits are made; such an ex ante control should be reinforced by the introduction of the so-called “golden rule”, which is supposed to sanctify the ownership of such discipline at the national level. But it’s important to say that this control doesn’t give the EU the power to define the content of the policies financed by the national budgets, and that it can’t have any influence on the Member States whose deficit is very limited. Third approach: the EU supervision of national economic policies, where the EU acts and will basically continue to act as a “super OECD”. The “Euro + pact” and the new Treaty recently adopted helped the EU to identify more precisely certain challenges (for example the relation between wages and productivity evolution); but they didn’t give     EGMONT Royal Institute for International Relations  4  the EU any political and legal means to impose such or such national policies. Albeit regrettable from an efficiency point of view, this situation is quite logical in terms of legitimacy: this illustrates perfectly the dichotomy mentioned by the “Studia Diplomatica” between “normative governance” on the one hand (on national budgets), and “incentive governance” on the other hand (on economic and social policies). In this context, the “branding” of the new Treaty is of central political importance. At the beginning of the negotiations, it was called “International agreement on a reinforced economic union”; at the end, “Treaty on stability, co-ordination and governance in the economic and monetary union”; and if we listen carefully to the way it is mentioned more currently, we can hear it’s a “Fiscal Compact”, even if it only corresponds to its third part. These evolving names fuel a political confusion which needs to be clarified, by stating that this treaty mainly reinforces discipline on national budgetary choices, without influencing that much the definition and implementation of economic and social policies. 2.2. The “governors” of the EMU: an interaction between legitimate actors The last essential political issue to address as regards the “EMU governance” concerns the actors who should intervene at the EU level because they are fully legitimate to do so. The European Council naturally appears as a key one, especially in times of crisis management, because its members benefit from the highest degree of political legitimacy; it could play another essential role in the medium run thanks to the new “euro summits”. However, it is important that the future president of these summits, who could be the president of the European Council, can be fully entitled to inspire the decisions and to follow up their implementation: what the recent events showed is indeed that a leadership exercised by only some national heads of state and government can be badly perceived and sometimes counterproductive (this is naturally a reference to the critics over “Merkozy”). As regards the monitoring of the rules adopted at the EU level and the concrete follow up of the EU decisions, the European Commission is and must be confirmed as the leading actor: only the Commission can indeed combine both the political representativeness and the technical capacities to act seriously on the medium and long run to guarantee the good functioning of the EMU governance. To reinforce its legitimacy to act, it would be interesting to discuss further the idea of a President of the Commission elected by the European Parliament only, and then indirectly by the citizens, and not designated by the European Council. Finally, the national parliaments appear more and more as other important political actors of the EMU governance: not only because they have the power to vote or to refuse the aid schemes for the EMU countries facing financial difficulties; but also because, as stipulated by the new Treaty, they should be involved in the discussions on national budgetary and economic choices. For the success of such an innovative mechanism, it’s indeed necessary to have the contribution of actors benefiting from the same degree of legitimacy – in complement of the contribution of the European Parliament: if a national parliament was to be influenced in its vote on a national budget,     EGMONT Royal Institute for International Relations  5  The European Policy Brief is a publication of Egmont, Royal Institute for International RelationsEGMONT Royal Institute for International Relations Naamsestraat 69 1000 Brussels BELGIUM   > www.egmontinstitute.be The opinions expressed in this Policy Brief are those of the authors and are not those of EGMONT, Royal Institute for International Relations this influence could indeed be better accepted if it comes from other parliaments. These five complementary remarks are naturally very general, but it seems to me that they cover the major aspects of the politics of the “EMU governance”.   Yves Bertoncini is Secretary General of Notre Europe         

The politics of the “EMU governance”. European Policy Brief No. 7, February 2012

  
 
EGMONT Royal Institute for International Relations 
No. 2 
June 2011 No. 7 
February 2012 
The politics of  the “EMU governance” 
Yves Bertoncini 
 
 
The “politics of the Economic and Monetary 
Union governance” is one of the key 
dimensions to take into account so as to 
understand what could be done in the short 
run to face the EMU crisis, but also to 
improve the functioning of the eurozone, 
and of the EU at large, in the medium and 
long runs. 
The “Studia Diplomatica” issue recently 
published by Egmont and referred to by 
Philippe de Schoutheete reminds us that 
substantial changes were already introduced 
in the EMU governance. To look at what 
could come next, it’s essential to consider the 
broad picture of the “politics” of this 
governance, which supposes in particular to 
consider its legitimacy. This will lead me to a 
twofold analysis and a total of five remarks: 
 the three first remarks focusing on the 
economic policies to be implemented -
dealing with the “output legitimacy” of 
the EMU governance; 
 the 4th and 5th remarks treating the 
functioning of the EMU governance as 
regards Member States and national 
democracies – i.e. its “input legitimacy”. 
1. The need for a more global 
« economic governance »  
My first remarks aim to state that, now that 
the EU have adopted structuring decisions 
on aid packages and reinforced budgetary 
discipline (with the new treaty), three major 
operational perspectives should be promoted 
as regards the economic governance of the 
EMU. 
1.1. A couple “solidarity versus 
responsibility” further deepened? 
The EMU governance evolved a lot in the 
last three years, from the “no bail out clause” 
of the Maastricht treaty to the European 
On 6 February 2012, Yves 
Bertoncini participated in a 
conference on European economic 
governance organized by Egmont – 
Royal Institute for International 
Relations. This Policy Brief is 
based on his intervention at the 
conference. The author pleads for a 
more encompassing form of EMU 
governance, which should be 
accompanied by a clarification of 
its democratic dimension. 
  
 
 
EGMONT Royal Institute for International Relations 
 
2 
 
Financial Stability Fund and then the 
European Stability Mechanism, to be ratified 
and put in place. These major steps were 
necessary but, as they were not planed, and 
even theoretically and legally excluded, their 
adoption was very costly in political and 
economic terms.  
In the short and medium run, the 
question is now:  should we go further in 
this direction, with more solidarity 
between the Member States of the EMU 
and more control on national budgetary 
and economic policies? More concretely, is 
the new Treaty recently adopted, and in 
particular its 2nd part devoted to a “fiscal 
compact”, a compensation for the solidarity 
already granted or, on the contrary, a pre-
requisite for more solidarity in the future?  
In this second perspective, the launch of 
“Eurobonds” or “Eurobills” to finance new 
debts in common, or the adoption of a 
“redemption pact” on past debts above the 
60% of GDP ceiling, would be welcome. But 
apart from the technical modalities to be 
selected, the political challenge is to know 
how the EMU governance could control 
more closely and “ex-ante” the design of 
national budgets and, more broadly, the 
definition of national economic and social 
policies. It is naturally very difficult to know 
how the EU could go much further in this 
direction – I will come back to this a bit later. 
1.2. A broader and sounder monitoring 
and supervision  
Dealing with the monitoring of national 
economies should naturally lead to considerer 
two other major developments to promote in 
terms of governance. 
The first political development is to 
monitor not only budgetary deficits, but 
also “macro-economic imbalances”. The 
recent crisis has shown that the private debt 
has to be monitored much better – after all, 
Ireland and Spain had respected very well the 
“Stability and Growth Pact”. The “six pack” 
reform introduced the idea that global 
macro-economic factors, such as productivity 
gaps or current account deficits/surpluses, 
should also be monitored better. But the 
concrete tools and processes to monitor such 
imbalances remain to be put in place: this is a 
major challenge in the short and medium run. 
The other field in which a reinforced 
supervision should be promoted is 
naturally the financial one: it’s indeed a 
financial crisis started in 2008 which is at the 
origin of the turmoil we are all confronted 
with; and the EU is not only facing a 
“sovereign debt crisis”, but also a “banking 
crisis”. To prevent other crisis of this kind, 
the EU must then improve the efforts already 
made in favor of more rigorous financial 
norms and practices, as well as in favor of a 
more integrated financial supervision – in an 
effort to establish what the Bruegel “think 
tank” calls a “banking federation”.  
1.3. The EU ability to produce growth: a 
new “package” to be defined 
Last but not least, the “EMU governance” 
should naturally give much more room to the 
promotion of growth, so as to 
counterbalance the impact of the austerity 
measures and norms recently adopted. This 
priority has rightly been mentioned by Didier 
Reynders in his keynote speech, as by more 
and more observers and actors. The 
challenge is not to limit the effect of the EU 
austerity measures or to coordinate better 
national policies so that they could produce 
more growth: it’s rather to exploit the real 
added value of the EU as regards growth, as 
  
 
 
EGMONT Royal Institute for International Relations 
 
3 
 
it was done with the adoption of the famous 
“Delors packages”. 
It happens that, after the emergencies of 
2010 and 2011, 2012 will be a key year on 
this field, with three main issues to be 
treated, as stressed by the recent declaration 
of Notre Europe steering committee: 
deepening further the internal market, 20 
years after the “1992 objective”; adopting a 
new “multiannual financial framework” 
combining support for solidarity measures 
and funding for transport, energy and 
communication infrastructures of common 
European interest; finally, issuing “euro 
project bonds” designed to fund future 
spending, primarily in the infrastructure and 
environment fields. Here again, apart from 
the technical choices finally made, the key 
point is to put growth much higher on the 
agenda of the EMU governance in the 
coming months and years. 
2. Clarifying the democratic dimension 
of the EMU governance 
I would like to make two other remarks 
focusing on the political dimension of the 
“EMU governance”, and more precisely its 
democratic one. To sum them up, I would 
say: what should the EU do vis-à-vis its 
Member States? And who should intervene at 
the EU’s level so as to “govern” the EMU? 
2.1. The scope of the EMU governance: a 
distinction between heterogeneous 
approaches  
The treatment of the Greek crisis and the 
recent adoption of a new Treaty can modify 
sharply the way the EU interventions are 
perceived in the Member States, with high 
political costs to be paid. It is then all the 
more necessary to distinguish clearly between 
three different political approaches. 
First approach: the situation of the 
“countries under programs” (Greece, 
Ireland and Portugal), in which the EU 
acts as (and alongside) the IMF, and can 
set its conditions. It is important to 
underline that the situation of these countries 
is very specific: it’s because they lost de facto 
their sovereignty, due to their excessive 
dependence on external creditors, that they 
should now rely on EU’s aid and implement 
the austerity programs they agreed on with 
the EU. 
Second approach: the EU control on 
national budgets, as put in place by the 
reformed “Stability and Growth Pact” 
and the new Treaty. This control allows the 
EU to impose sanctions on the Member 
States facing severe deficits they are reluctant 
or unable to reduce; it could soon intervene 
ex ante, when the budgets are discussed, and 
not only ex post, when the deficits are made; 
such an ex ante control should be reinforced 
by the introduction of the so-called “golden 
rule”, which is supposed to sanctify the 
ownership of such discipline at the national 
level. But it’s important to say that this 
control doesn’t give the EU the power to 
define the content of the policies financed by 
the national budgets, and that it can’t have 
any influence on the Member States whose 
deficit is very limited. 
Third approach: the EU supervision of 
national economic policies, where the EU 
acts and will basically continue to act as a 
“super OECD”. The “Euro + pact” and the 
new Treaty recently adopted helped the EU 
to identify more precisely certain challenges 
(for example the relation between wages and 
productivity evolution); but they didn’t give 
  
 
 
EGMONT Royal Institute for International Relations 
 
4 
 
the EU any political and legal means to 
impose such or such national policies. Albeit 
regrettable from an efficiency point of view, 
this situation is quite logical in terms of 
legitimacy: this illustrates perfectly the 
dichotomy mentioned by the “Studia 
Diplomatica” between “normative 
governance” on the one hand (on national 
budgets), and “incentive governance” on the 
other hand (on economic and social policies). 
In this context, the “branding” of the new 
Treaty is of central political importance. At 
the beginning of the negotiations, it was 
called “International agreement on a 
reinforced economic union”; at the end, 
“Treaty on stability, co-ordination and 
governance in the economic and monetary 
union”; and if we listen carefully to the way it 
is mentioned more currently, we can hear it’s 
a “Fiscal Compact”, even if it only 
corresponds to its third part. These evolving 
names fuel a political confusion which needs 
to be clarified, by stating that this treaty 
mainly reinforces discipline on national 
budgetary choices, without influencing that 
much the definition and implementation of 
economic and social policies. 
2.2. The “governors” of the EMU: an 
interaction between legitimate actors 
The last essential political issue to address as 
regards the “EMU governance” concerns the 
actors who should intervene at the EU level 
because they are fully legitimate to do so. 
The European Council naturally appears 
as a key one, especially in times of crisis 
management, because its members 
benefit from the highest degree of 
political legitimacy; it could play another 
essential role in the medium run thanks to 
the new “euro summits”. However, it is 
important that the future president of these 
summits, who could be the president of the 
European Council, can be fully entitled to 
inspire the decisions and to follow up their 
implementation: what the recent events 
showed is indeed that a leadership exercised 
by only some national heads of state and 
government can be badly perceived and 
sometimes counterproductive (this is 
naturally a reference to the critics over 
“Merkozy”). 
As regards the monitoring of the rules 
adopted at the EU level and the concrete 
follow up of the EU decisions, the 
European Commission is and must be 
confirmed as the leading actor: only the 
Commission can indeed combine both the 
political representativeness and the technical 
capacities to act seriously on the medium and 
long run to guarantee the good functioning 
of the EMU governance. To reinforce its 
legitimacy to act, it would be interesting to 
discuss further the idea of a President of the 
Commission elected by the European 
Parliament only, and then indirectly by the 
citizens, and not designated by the European 
Council. 
Finally, the national parliaments appear 
more and more as other important 
political actors of the EMU governance: 
not only because they have the power to vote 
or to refuse the aid schemes for the EMU 
countries facing financial difficulties; but also 
because, as stipulated by the new Treaty, they 
should be involved in the discussions on 
national budgetary and economic choices. 
For the success of such an innovative 
mechanism, it’s indeed necessary to have the 
contribution of actors benefiting from the 
same degree of legitimacy – in complement 
of the contribution of the European 
Parliament: if a national parliament was to be 
influenced in its vote on a national budget, 
  
 
 
EGMONT Royal Institute for International Relations 
 
5 
 
The European Policy Brief is a publication of Egmont, 
Royal Institute for International Relations
EGMONT 
Royal Institute for International Relations 
Naamsestraat 69 
1000 Brussels 
BELGIUM 
  
> www.egmontinstitute.be 
The opinions expressed in this Policy Brief are those of the 
authors and are not those of EGMONT, Royal Institute for 
International Relations 
this influence could indeed be better accepted 
if it comes from other parliaments. 
These five complementary remarks are 
naturally very general, but it seems to me that 
they cover the major aspects of the politics of 
the “EMU governance”. 
 
 
Yves Bertoncini is Secretary General of Notre 
Europe 
 
 
 
 
 
 
 
 


The politics of the “EMU governance”. European Policy Brief No. 7, February 2012

Abstract

Similar works

Full text

Available Versions

Archive of European Integration

Archive of European Integration