"[After considering the Fiscal Stability Treaty and moves towards banking union:]
But none of this is enough. Instead of imposing fines on countries that transgress rules and ignore recommendations, as the SGP was supposed to do, the European Commission, the European Council, and – this is essential – the European Parliament should decide directly on measures to be immediately implemented in the country concerned. Fiscal and certain other economic policies should be subject to activation of a eurozone “federation by exception.”
The idea that sharing a single currency also means accepting limitations on fiscal sovereignty is not new. A “federation by exception” merely draws the logical consequences from the ineffectiveness of the fines envisaged by the SGP, and is fully consistent with the concept of subsidiarity that has been applied since the SGP’s introduction: as long as national economic policy complies with the framework, there are no sanctions.Perhaps the most important element of the “federation by exception” would be its strong democratic anchor. Its activation would be subject to a fully democratic decision-making process, with clear political accountability. More precisely, decisions to implement measures proposed by the Commission and already approved by the Council would require a majority vote by the European Parliament – that is, those representatives elected from the EU’s eurozone members.In such exceptional circumstances, the parliament of the country concerned should have the opportunity to explain to the European Parliament why it could not implement the recommendations proposed, while the European Parliament could explain why the eurozone’s stability and prosperity are at stake. But the final word would belong to the European Parliament.In the past, I have suggested establishing a eurozone finance ministry, which would be responsible for activating economic and fiscal federation when and where necessary, and for managing new crisis-management tools like the European Stability Mechanism. It would also be responsible for overseeing the banking union, and it would represent the eurozone in all international financial institutions and informal groupings.But, most important, “federation by exception” would ultimately cease to be an exception. The finance minister would be a member of the EU’s future executive branch, together with the other ministers responsible for other federal departments."
This turns the idea of the democratic deficit on its head. The problem of the EU has been that it needs to be made more democratic and accountable to citizens, and that national electoral mandates have not provided that democratic legitimacy. There may be a need for a proper economic union to create a sustainable Eurozone, but if there needs to be some common policies, they should be, well, common policies rather than a selective intrusion into Member States. The kind of political union proposed by Trichet would bring a democratic deficit into Member States: those elected on a European mandate should make decisions on common European policy and not on national policy.
While economic union means that common policies are set, it is up to the Member States to decide for themselves on their economic policies. The aim of a common European economic policy is for the Eurozone to work as a currency area, not for the European institutions to set national policies in detail. So while by being part of the Eurozone Member States have to act in the common interest of the Euro so it isn't threatened or destabilised, it's up to the Member States to decide on their economic policies and how they will invest and pay down debt. Not only is Trichet's plan politically unacceptable, but it wouldn't work - if the national parliament is unable to meet the conditions of loans or of Eurozone membership, then it's because there isn't the political will within the Member State to take the necessary actions and drafting in another elected body to take those decisions won't be effective either, since it would lack democratic legitimacy and since the national administration is of course under the control of the national parliament and other state institions.
It takes a pretty strange concept of subsidiarity to propose the European Parliament standing in for the national parliament...