The phrase “more Europe” should be abolished from our vocabulary. I know it is an utterly futile wish. The need for “more Europe” is something repeated ad nauseam by Brussels-based MEPs and commissioners, generally when they have nothing of substance to say. The German media and political class, among others, are also big on the idea. Der Spiegel reports that “more Europe” is “the official stance of almost all German political parties [in] response to the crisis”. In the words of Deutsche Welle, “For months, [German Chancellor Angela] Merkel has stressed the need for more Europe to solve the debt crisis.” There is international consensus too, as when Merkel met with French President François Hollande in Paris in June to show their common will for “more Europe” and “deepening the economic and monetary union”. My what a wunderbar consensus we have!

Obviously if there is such widespread agreement on the phrase it is because it is utterly devoid of meaning. The expression lets everyone mean exactly what they want it to mean, without anyone else knowing what it might be. What do we mean specifically? In the case of Merkel, she most certainly means EU-level laws limiting budget deficits and EU-level enforcement of said laws, in perpetuity and regardless of future democratic majorities. That is an extremely controversial and specific form of “federalism” and the phrase “more Europe” serves to hide this reality behind an innocuous slogan. Needless to say, this is a great disservice to Europe is its citizens need a full and frank democratic debate on any and all new quasi-constitutional reforms to the eurozone.

Merkel’s choice of words is understandable, given her position, and she is hardly alone. But it does mean the quality of public discourse in Continental Europe is often just as bad as the oft-mocked, reality-challenged euroskeptic debate in the United Kingdom.

The fact is there are many deeper, shallower and partly overlapping “Europes”. These include the European Union, the eurozone, the Council of Europe (which includes Russia and Turkey) with notably the European Court of Human Rights, the Schengen Area of free movement (most of the EU plus Norway and Switzerland), the constellation of interconnected European space and defense firms/intergovernmental organizations (European Space Agency, EADS, Ariane rockets, Airbus, Eurofighter, Galileo satellite navigation…). These are all “Europe” but, beside beings forms of cooperation between Europeans, they have little in common and are fundamentally different in their success, their level of democracy, and in their implications for (the lack of) national sovereignty.

By far the most important difference, at least today, is between the eurozone and the wider European Union. As we consider the reform (or abolition) of both today, we should understand how they came about and just how staggeringly different they are with, in my view, one being a reasonably democratic multinational institution based in Brussels, the other being an almost completely unaccountable and dysfunctional Eurocracy of central bankers and lawyers which, incidentally, is far, far more powerful than any other entity in European affairs.

Brussels’ “community method”: Pretty democratic

It is worth stressing just how much the Maastricht Treaty, which created the Economic and Monetary Union (EMU) and ultimately the eurozone, broke with the tradition of European integration, usually embodied the phrase the “community method.”

“Traditional” integration, focused on Brussels, is reasonably democratic and legitimate. As detailed in this excellent in-depth piece by Financial Times reporter Stanley Pignal, “Brussels’” power is real but limited: It concerns a budget of 1% of GDP and regulations that, though binding, must be arrived to consensually. The system is chock full of checks and balances: the Parliament must approve, either every government has a veto or a tiny minority can block a proposal, and the Commission has very weak policing powers so, in fine, national governments in most cases can “fail” to implement or simply go rogue. The only change there has been is a very gradual shift from pure vetocracy to the extension of qualified majority to more and more areas in the Council of Ministers (where national governments vote, much as representatives of States do in the U.S. Senate or German Bundesrat). This has potentially for-reaching consequences for the loss (or pooling) of national sovereignty, but it is not inherently undemocratic (to the contrary).

Contributing to this process of consensus-building is the input of the famous constellation of Brussels-based pan-European federations (often just networks) of consumers, trade unions, scientists and, most of all, businesses (you know, beer, woodworkers…). Of course there is possibility for abuse and corruption (for example with the unaccountability of EU agencies or obscure “comitology” procedures) but, on the whole, it tends to be pretty harmless stuff or, to put it another way, the setup is no worse than what one usually finds at national level and typically simply reflects the corruption (or virtue) at national level.

Frankfurt’s “technocracy”: A radical departure from European tradition

The creation of the eurozone was completely different. This was not widely understood at the time by Europeans. The French, for one, would have almost certainly voted no had they understood the full implications of the Treaty (they only gave a “petit oui” of 51%). The drawbacks of Maastricht were, however, predicted and predictable, mainly by the Anglo-American community of “euro-wonks” who (speaking English) could follow the international debate fully and, being outside the eurozone, had the freedom to be critical without worrying about appearing “anti-European”. In this section, I will draw in particular on Kenneth Dyson and Kevin Featherstone’s massive 1999 The Road to Maastricht, a 700-page study of the Treaty’s negotiation based on some 280 elite interviews. This is not a euroskeptic screed (Featherstone was an EU-funded Jean Monnet professor) but simply a monumental study of the negotiation and objective consequences of Maastricht, warts and all.

As I suggested in a previous post on who runs the EU, regular EU politics and eurozone politics exist on two almost completely different levels. One concerns commissioners, MEPs, lobbyists and mid-level diplomats. The other has massively high stakes and concerns presidents, prime ministers and, above all, the European Central Bank. Then, as today, the European Parliament and the Commission are more or less completely excluded from eurozone policy.

Maastricht, if one looks at the fine print, prescribes an extremely specific, anti-democratic and ideological form of monetary union (this was essentially to keep the Germans happy at the time, as they had the strongest economy and most to lose from abandoning the Deutsche Mark). The Treaty mandates that:

• Fighting inflation is the primary objective of central banking, growth and employment are secondary. (Treaty on the Functioning of the European Union (TFEU), article 282, paragraph 2)
• The central bank must be “independent,” that is, the influence of democratically-elected politicians over control of monetary policy must be nil. (TFEU, article 282, paragraph 3)
• Central bank financing of national governments is banned, as are fiscal transfers. (TFEU, article 123, paragraph 1)

It’s worth stressing how truly radical these ideas are and, in particular, the idea that these preferences should be made eternal constitutional law, unchangeable by any democratic majority. They are radical no matter one’s frame of reference.

First, Maastricht is radical in terms of mainstream economic theory. As American economists virtually unanimously pointed out, European central bankers and governments who negotiated Maastricht simply pretended that optimum currency area theory did not exist (the need for a combination of labor mobility, flexible wages and firing, less asymmetric shocks and, most controversially, fiscal transfers). On fiscal transfers, Maastricht, and the eurozone generally, is almost comically anti-economic, as it sees the federal authorities’ role not in stimulating depressed parts of the Union, but rather in the punitive one of policeman pushing for budgets cuts in the teeth of recession (which, in terms of debt-reduction, is self-defeating). The eurozone’s architects were prey to a kind of a magical-wishful thinking, as Paul Krugman in 1998 sarcastically (already) defined what he called the “Maastricht ideology, which says that all good things come to those who have balanced budgets, sound money, and flexible markets.” (You can already hear “virtuous” Spain and Ireland screaming.)

Second, Maastricht is radical in terms of international monetary policy norms. Virtually no major economy in the world outside the eurozone constrains itself with ECB-style banking rules, either in terms of inflation or debt-buying. The Treaty bans the ECB from buying government debt and German politicians harp on that debt-buying is a threat to the central bank’s cherished independence. The Bank of England, the U.S. Federal Reserve and the Bank of Japan are all notionally independent and they all buy massive amounts of national debt (largely the reason they are not suffering from debt crises despite having more debt than the eurozone).

The French, good Statists that they are, are not the sort to make a fetish of anti-inflation or central bank sovereignty. Indeed, at Maastricht they made the argument that “a central bank cannot in practice behave independently.” Dyson and Featherstone present the argument thus:

In the first place, an ECB will inevitably be exposed to political pressures. The question is whether these pressures will be focused on, and contained within, some institutional framework (a gouvernement économique) or left unstructured to play directly and behind the scenes on the ECB.

I personally, God bless my Frenchness, find this argument very compelling and it has almost inarguably been completely confirmed by recent events (at least in the context of the eurozone). More generally the French are actually quite close to American ideas on central banking.

But it’s not just lazy Latins and irresponsible Anglos. The Maastricht central banking rules are also at odds with tradition in the “core”. According to Dyson and Featherstone: “The Dutch political leadership […] did not attach the same importance as the Germans to the independence of national central banks.” (This was important because the Dutch held a rotating presidency during the negotiations.) In fact, up to Maastricht, the Netherlands central bank was directly dependent on the finance ministry.

Then there is Germany, the country which demanded that central bank independence and anti-inflation be made sacred and inviolable. This is actually understandable. First, economic success, the Bundesbank and the Deutsche Mark were the only things the postwar Germans were “allowed” to be proud of, so it’s not surprising that these attained an inordinate importance in the national ideology and that the Germans should want to protect it. Second, the Germans are quite right to be afraid of indirect fiscal transfers from rich to poor countries via the eurozone by debt financing and, thanks to their demand the ECB be made as undemocratic as possible, these fiscal activities would crucially happen without any democratic accountability. But I’ve not come across any serious independent economist (e.g. one not directly employed by the EU) make the argument that a central bank’s never financing of public debt was economically superior. In fact, the Bundesbank itself financed German national debt in 1975 at a moment of economic crisis to the tune of 1% of GDP (for the eurozone today, this would be €150 billion). So Maastricht even contradicts the historical practice of monetary policy in Germany itself.

Third, and perhaps most interestingly, Maastricht is radical in terms of the tradition of European integration itself. As Dyson and Featherstone note: “EMU was anything but communautaire in design.” And as they go on to detail:

The new system of governance for EMU […] remained heavily skewed to the advantage of the ECB. It had no parallel at the EU or national level. EMU had adopted the Bundesbank model, but without the other parts of a conventional government structure. In monetary policy, ECOFIN [Council of finance ministers, representing national governments], the European Parliament, and the Commission remained weak appendages. The ECB had more authority in its domain than the Commission normally has across its different fields of responsibility, and more than the old High Authority of the ECSC possessed.

Anyone who works in EU affairs soon realizes the truth of this. Though the euro is presented as the currency of the EU and the ECB is formally an EU institution, Brussels and Frankfurt practically live in different universes. In fact virtually the only overlap between them is the Commission’s Directorate-General for Economic and Monetary Affairs (DG ECFIN), which serves as the ECB’s policeman, drafting and enforcing the rules to punish fiscal wrongdoers. (As an example, the Commission threatened to impose massive budget cuts to Hungary earlier this year, not because of the government’s nationalist, antidemocratic and anti-free speech moves, but because it had the audacity to propose a law which might reduce the national central bank’s independence.)

Those with a Europhile tendency can take heart: the euro embodies a completely radical economic philosophy, it has failed, and it is monstrously undemocratic, but it is also a system with “no parallel at the EU or national level”. As I suggested earlier in this post, the Brussels-based institutions and “community method” are reasonably democratic and, as such, are defensible even if Maastricht is not.

The eurozone: A “neoliberal” dictatorship of central bankers

All this has consequences. Dyson and Featherstone explain them in minute detail:

The Treaty stressed the political independence of the ECB and assumed that such independence stood in inverse relationship to the principle of accountability. The provisions on the accountability of the ECB – mainly before the European Parliament – were weak, and other forms of accountability were left unexplored […].

It has served to strengthen elite dominance and to transfer power within elites, especially in favor of central bankers, by entrenching monetary and fiscal-policy rules. This restricted territory of debate privileged a newly ascendant “sound” money paradigm which, not least, advocated central bank independence as a central precondition for non-inflationary growth. Actors were disposed to promote the interests of the institutional milieu in which they operated. Hence the motives that inspired EMU had more to do with empowering executives and “binding” the political process than with democratic issues of accountability, transparency, participation, and identity.

The authors go so far as to describe Maastricht, quite dispassionately, as a neoliberal “Trojan horse,” because the way for the euro might work without fiscal transfers would be via massive adjustments through laissez-faire capitalist reforms (which is what we are now explicitly seeing in the periphery).

There’s a reason why – across the world in general and in Europe in particular – we so cherish democracy, the rule of law, limited power (or “checks and balances”), transparency and accountability in our governments. We abandoned these at Maastricht and now European citizens are reaping the sorrows sown by their negligence twenty years ago, and that of their leaders.

Now we get the economic failure, we get the ECB unaccountably and arbitrarily lending mind-boggling sums as it pleases (€200 billion to Spain and Italy, €1 trillion to the banks), we get the collapse of democracy in the periphery (Eurocrats and Germans increasingly dictating national budgets), we get the outlawing of Keynesianism with the Fiskalpakt, and, as even implied fiscal transfers are outlawed, we necessarily and undemocratically get the dismantling of the European social model in the periphery, with labor market liberalization, privatization and cuts to infrastructure, welfare, education and health (and even, if the ECB had its way, tax cuts).

The tradition of European integration has always had a technocratic element, but eurozone integration since Maastricht goes much further: It is simply in flagrant contradiction with postwar Europe’s common democratic, social and national traditions and values.

Was it worth it?

This is all extremely damning. There is no immediate or medium-term prospect of any improvement of the economic situation and, even still less, of the democratic situation. The eurozone is unlikely to be brought into line with either national or EU (“community method”) democratic norms. All that is left to do is judge EMU and the euro based on its stated objectives (some of these are rather French):

1. Economic prosperity for Europe and the export of German “stability culture” to the peripheral countries.
2. The rise of a European global currency and the end dollar dominance.
3. The end of German dominance of the European monetary system.
4. The guarantee of peace in Europe after the end of the Cold War (destabilized by the collapse of the Soviet Union and, allegedly, German Reunification), notably by firmly nestling the new Germany within a united Europe.

Twenty years after Maastricht, to recall these objectives is to invite scorn for the euro. Objectives 1 and 3 have proved total failures. Objective 2 is largely a failure. Objective 4, “united Europe-cum-peace,” is arguably the most important. Fear of a return to balance of power politics and ultimately war after 1989 may have justified some of the alarmism that motivated Mitterrand and Kohl, as the last “war generation” of European leaders, to make a great pseudo-federal push. In retrospect this was clearly a mistake, no one can seriously claim that an integrated Europe without the euro would have been more prone to war. If anything, by fostering economic disaster and political crisis, the euro has strongly encouraged the conditions for extremism, nationalism and racism.

True, the euro may ultimately lead to a federal Europe, even if it is through crisis, but only a sadomasochist would desire more European power of the kind that we have seen in the eurozone and that we are continuing to see emerge. This would be a perversion of all that was good in the ideal of European unity.

Going forward: The debate that is needed

Europeans have then compromised a great deal of their fundamental principles for the eurozone and gained very little in return. It leaves two paths. Either the eurozone is “communitized” and reformed to have the usual democratic norms of the EU (which the Germans will very certainly and understandably reject, because it would mean abandoning the application of their economic ideology at EU level and, ultimately, lead to their paying and/or being liable for other countries), or we go back to national currencies.

Each country, and Europe as a whole, will have to debate and decide for itself what it is willing to sacrifice and how to best live up to its principles. Those debates are more necessary than ever. What is not necessary is the worthless phrase “more Europe,” which serves only to hide and depoliticize the nature of the momentous, quasi-constitutional decisions to be made about the eurozone. That is how we got Maastricht, which is to say, that is how we got into this bloody mess in the first place.

It will require Federalists to change as well. The characteristic of many is to be utterly indifferent to the content and conditions of a particular transfer of power to the EU. It is considered good in and of itself because it is “European” (good) and not national (bad).

But what if the EU wanted to do a really stupid thing like, say, jump off a cliff? It often seems that if the European Commission were to come up with a good draft paper for the “European Escarpment Hurdling Programme” and put a nice golden star-spangled blue flag on it, the Good Federalist would praise it because it’s “European” and we’d all in perfect unison leap into the abyss like noble-minded lemmings.

This may seem like caricature. But it is actually a pretty fair description of national politicians’ and the media’s reaction to and support of the 1992 Maastricht Treaty that ultimately created the euro. In most countries, and certainly France, the actual fine print of the text was never defended because it was indefensible. As we have seen, it gave incredible, undemocratic and unaccountable power to central bankers, was economically dubious, and constitutionalized a particular economic philosophy, making a particular, right-wing German ordoliberalism the unchangeable basic law of Europe (unchangeable by any future democratic majority, unless there is total unanimity).

How could people support such a travesty? Many people in good faith thought it was a deal, probably the only one that could be reached that could create a common currency, and therefore should be accepted regardless of whether it was a good deal. In this the Good European shares a lot with the bad politician who does “something” not too preoccupied about whether “something” is good. And since you’ve made it this far, I reward you with the ever-entertaining and educational Yes Minister:

We need to be rather more critical that and European citizens in general need to be rather more vigilant.