The Involuntary Union: European Economic Governance and the 'Union State'

The political reaction to the economic crisis shows two things: First, in moments of great crisis, the nation-state is the first port-of-call. With economic stability at stake and large quantities of taxpayers’ money needed to save the financial sector, no one asked for help from ‘Europe’. Instead, everyone—from bankers to carmakers to citizens—counted on their respective governments to intervene. Second, national governments all too soon find out that, on their own, they cannot do much. They have to turn to ‘Europe’—to their collective government institutions at the EU-level, the European Commission and the European Central Bank (ECB)—to manage the crisis. What the ongoing Euro crisis thus shows is that the process of European integration has long ceased to be a matter of choice. Rather, it has become an urgent necessity.

Until the fall of the Iron Curtain, European integration was above all a matter of choice. The member states joined forces voluntarily, without being compelled to do so by external forces. The main military threat—nuclear confrontation—was held in check by NATO, to which most of the states of the then-European Community belonged. This ‘voluntary union’ was founded on economic opportunity, and was later supplemented (and codified in the Maastricht Treaty) by a desire to establish an external political identity and finally by the ambitious foundation of a European citizenry.

However, by the end of the ‘golden age’ of the 1990s, the general conditions governing European integration had dramatically changed. The EU members’ voluntary efforts to integrate themselves and to create common goods had left them collectively vulnerable to international pressures that arose from the end of the Cold War. This is true for economic integration, which is driving by competition with rising powers such as China, India, Brazil, and Russia, as well as for foreign policy, where acute crisis management has become the major driving force of integration, and the field of home affairs, in which the protection of citizens dominates policy developments. Thus, integration today can no longer be seen as a matter of choice, but of necessity.

Given these external pressures, it is interesting to note that although the EU has been a global economic power for more than half a century, it does not have a competence to set economic and employment policies. The drawbacks of an incoherent division of authority were clearly illustrated by the EU’s initial reaction to the economic crisis. Badly coordinated stimulus packages and strictly national rescue plans for stricken industries painted a sufficiently confusing picture of the Union. This did not come too much as a surprise, however, as there were neither the mechanisms in place obliging more economic cooperation, nor the money available at the EU level for decisive joint action (e.g. through a European-wide stimulus financed by the Commission). Moreover, the member states simply did not (yet) feel the vital need to coordinate their policies better.

Just like the crisis originated from the financial sector, it needed a financial crisis in Europe for member states to agree to more binding rules on economic policy. During the first culmination of the debt crisis in May 2010, member states agreed on immediate rescue measures (for Greece and for the Eurozone as a whole) as well as to set up a working group to develop farther-reaching proposals for new governance mechanisms in the Eurozone. Ironically Germany, one of the most vocal opponents to any form of ‘economic governance’ until then, was now the one making the most far-reaching proposals. Its motivation was clear: to receive assurances of stricter and better-coordinated economic policies in return for the budgetary help provided. As long as the ‘no bailout’ clause of the Treaty could be taken literally (i.e. no financial transfers of any kind between Eurozone members), governments refrained from integrating their economic policies. Now that national taxpayers’ money has been put to guarantee or directly support other member states, those on the giving end want to make sure to curb the irresponsible policies that led to the near-collapse. In short: The price of the rescue is stronger control over the economic and budgetary policies of the country applying for help. Importantly, this control is exercised by member states collectively (together with the ECB and the International Monetary Fund)—it is not communitarised.

This points to an important change in the constitutive balance between member states and the Union. Under the crisis, the idea of a ‘Union State’ emerges as the new way of integrating Europe. It is not the federal state that some fear and others seek. Rather, it is the extension of the ‘Union method’ (stipulated in the wake of the signing of the Lisbon Treaty) to a broader principle complementing the process of European integration. This would elevatate the member states, via the European Council, to an integration driver in crisis-prone policy fields from outside the community competence such as public finances and energy security. Once government leaders have agreed on a course of action, they can choose the intergovernmental or integrationist route, involving the Commission – and, consequently, the Council and the Parliament – as they deem necessary. This way, a stronger involvement of member states does not end up as ‘re-nationalisation’ but instead creates the necessary buy-in from governments for more integration.

Either way, member states have one crucial task – beyond accepting their own new role: They urgently have to explain to their citizens why ‘more Europe’ does not represent the end of the nation state but that further integration of this kind is instead vital to their very survival.