For the past two years, the national leaders of European member states have been meeting more and more frequently to buy themselves ever more time to deal decisively with the economic crisis engulfing the Eurozone and the wider European economy. From quarterly meetings to monthly meetings, to weekly conference calls … now the amount of time ‘bought’ by a meeting of heads of European states is no longer than 3 days, including a weekend. There is no clearer indication of the risk of impending failure of a political system.
The decision of George Papandreou to call a referendum on the latest ‘rescue’ package for Greece on Monday, following its agreement by European leaders on the previous Thursday, has thrown financial markets back into total uncertainty and revealed just how little political capital the current leaders of Europe have left. Technical fixes for the European economy are no longer sufficient, the time has run out: only a paradigm shift in the way politics is done will change the current course of events which risks cutting deeply into the social fabric of Europe in ways that will take generations to heal.
Democracy has, in a sense, caught up with the European leaders. The signs over the last couple of months have been several, from the German constitutional court ruling that Angela Merkel must have a mandate from the German parliament before committing Germany to more exposure or expense at a European level, to the debacle of the Slovakian vote on the Eurozone rescue plan … not to mention an increased number of peaceful public protests, camps and occupations.
The decision to call a public plebiscite in Greece can be seen as a last desperate effort to reinstate some democracy into a decision-making processes which has lost both the support of the public and the confidence of financial markets. The bullying attempts of French and German leaders to force the Greek prime minister to retract his call for a referendum will only increase Greek public resentment towards the Eurozone package. Whatever the results of such a plebiscite – should it be held – a durable resolution to the crisis will only come with a rethinking of the bases of democracy in Europe. Here below we outline both some immediate and medium term actions.
ECB as lender of last resort
In the immediate term, the stemming of contagion from the Greek sovereign debt crisis almost certainly requires the European Central Bank to assert that it will act as the lender of last resort to Eurozone governments and thereby establishing price certainty in the government bond markets. Through acting in the secondary markets, this could be achieved now without a treaty change, and it would end the scandalous situation where the ECB is lending to banks at a minimal interest rate for the banks then to lend to governments at extremely high rates. The objection that in so doing the ECB would create inflation is unfounded, given that the ECB has already been lending to banks in the secondary markets on the basis of highly dubitable securities, without any noticeable impact on inflation. The moral risk of lending to governments is also, surely, less of a risk than lending to banks, given their exposure and recent track-record.
Eurobonds and European democratic control over the economy
In the medium term, the issuing of joint Eurobonds and a series of treaty changes in Europe seem both unavoidable and desirable. Eurobonds to symbolise European solidarity and relaunch the European economy, and treaty change to ensure democratic control over the economy.
If Germany has had legitimate objections to the plans for Eurozone rescues over the past months, they have been based on the claim that it is unfair for people (ie. German tax payers) who have had no say in making decisions about the economy of a country (eg. Greece) to have to pay for the consequences of those decisions. A very similar claim is being made by those protesting about public money being used to rescue the banks: they are being asked to pay for a crisis they had no role in creating. The two problems must be dealt with together, and for as long as there is no resolution to them, any ‘international’ agreement will be contingent on changing national political situations, thereby offering no security in an integrated European economy.
Democracy is, amongst other things, the best way of ensuring accountability and transparency. There must be more democratic control over the shape of the economy, and the end of the neoliberal dogma that the economy must be left independent of all political control or regulation. At the same time, the democratic control over the European economy must be genuinely European: it is no longer politically or socially sustainable for nationally elected decision-makers or national publics to make decisions that have enormous impacts for others in the European Union. European economic governance must be directly European for European citizens, and no longer fragmented through national institutions which create an institutional smoke screen that prevents effective deliberation on the European common good.
The only alternative to increasing democratic control over the economy, in an economy like Europe’s, is to impose an institutional straitjacket restricting national political choices, and most likely favour the rich ‘creditor’ Eurozone economies over the weak ‘debtor’ countries. The reinforcement of what in principle was an inflexible straitjacket like the Stability and Growth Pact not only represents a misguided approach to learning from a crisis (where flexibility is exactly what is required), but will feel like a dictatorship to citizens, and there will be no guarantee for how long it will be tolerated.
A citizens’ agora for a new social pact
To achieve the necessary paradigm shift in European democracy, the process of treaty change will have to be considerably different from the experience of the Nice and Lisbon treaties. No longer can the European elites design a new treaty on their own and expect the public to go along with it. We have already seen the results of that approach, in much more ‘favourable’ conditions. The process must involve citizens from the outset, not only to have political legitimacy, but in order to constitute a European citizenry which conceives itself the same political community, with citizen who are willing to act to support one another and take decisions together, and have common political institutions to allow them to do so whilst guaranteeing their fundamental and social rights. For that, the best start would be to start a large scale and genuinely transeuropean public deliberation involving NGOs and citizens themselves as well as politicians and functionaries from throughout Europe to decide on a new social pact for an economy of solidarity. This transeuropean deliberation could be called an ‘agora’, with a final stage in the European parliament.
The process of treaty change will throw up difficult questions, not least of the status of those countries reticent to engage in more European integration, such as the United Kingdom which has a ‘referendum lock’ on new European treaties. There is already a multi-speed Europe in many areas of integration: the UK and Poland have opt-outs of the Charter of Fundamental Rights; the Schengen area covers 25 EU and non-EU members etc. Further treaty change should allow the extension of this logic of enhanced cooperation in economic governance and its democratic control. Although we believe that the strong interest of the peoples of all EU countries is to be as fully integrated as possible, in order both to overcome the reticence of some holding back others, and to clarify the situation for everybody, these questions must be treated and decided. Indecision is having both a very tangible financial cost, and a much more serious democratic cost, where disengagement with all political institutions and mistrust is growing and deepening.
Other difficult decisions will be on exactly how the European Parliament, or a system of European parliaments, exercises its democratic control on the European economy, and exactly the mandate and democratic scrutiny of the European Central Bank. These questions must be decided, and these institutions will only have a genuinely democratic character if the decisions are taken as a result of a wide public debate.
A congress for change
We citizens of Europe need not feel we are unable to take part in the redefinition of European politics. Where the national leaders are failing, the citizens have both the right and the responsibility to act to make preparations for the new politics to replace the old. European Alternatives, along with many others, is engaged in that task. With these objectives in mind, European Alternatives is calling a Congress for Change in the European Parliament on the 30th November, as the start of a process that will run over 2012.