Wednesday 9 November 2011

Democracy and the Eurozone Crisis

There will no longer be any referendum in Greece on the new Eurozone deal, and a technocratic-led national unity government will take over before elections can be held in February. (And a good thing that there will be elections - Greece needs to confront its economic future in a way that the Greek people will buy into the responsibility of the decisions that need to be taken). Now that the referendum has been called off, it's taken as a indictment of Europe that France and Germany could pressure Greece to drop the referendum by saying that the money will be withheld unless a referendum would return a positive result.

This is a very strange argument. Surely it wouldn't be taking Greek sovereignty and democracy seriously if the Eurozone continued to loan Greece money and expect them to implement austerity measures regardless of any referendum they held? And the implication that the Eurozone should be willing to loan money to Greece regardless of Greece's commitment to any deal suggests that the rest off the Eurozone deserves less of a say. While a partial default within a Eurozone deal or a total default outside any Eurozone loans isn't an attractive choice, Greece cannot change that choice by elections or referendums: democracy is when people come together to decide what to do in the situation in which they find themselves. Sadly, for Greece and the rest of the Eurozone there are no good options.

Fintan O'Toole has an article in The Irish Times about the disconnect between capitalism and democracy:

"And this isn’t just a simple matter of the Merkozy monster lording it over us little PIGS. For at this historic moment, even the German chancellor is little more than a cipher. She’s caught in the democratic crisis too. Remember this time last year when Angela Merkel started to make noises about bondholders sharing the pain of rescuing the banking system? She had to back down very quickly and make it clear that she didn’t mean present bondholders – heaven forbid. Even the German chancellor isn’t allowed to say certain things."

I don't entirely agree with him, but I do think that markets and globalisation has grown and proceeded to such and extent that it benefits us to make some market and economic decisions collectively in the EU. Yet the EU, despite the almost co-equal power of the European Parliament, has a huge democratic disconnect. With the Treaties unequipped to deal with the Eurozone crisis, the approach to solving it has been intergovernmental, which has caused tensions between small Member States and non-Eurozone states who have the most to loose politically from governing the Eruozone from the Eruopean Council, and big Eurozone Member States (primarily France and Germany) who are better placed to have the most influence.

It might take ages to finalise a new treaty to equip the EU institutions to better deal with fiscal union issues, but it is most likely to be produced after the major crises are solved (or stabilised, if we're lucky enough). European issues have never been so widely discussed in Europe than they are now: since the Euro and the future of the EU is such a major issue, and the European Parliament has gained more powers since the last election in 2009, it might be worth having another European election. It would provide an opportunity to involve citizens more directly in the debate over what needs to be done and can also focus on the Parliament's new power. Though the EP isn't in a prime position over the EFSF or future fiscal union, an election would give the Parliament (and the Europarties) a stronger mandate in their proposals, and could be a useful way of gauging (informed) public opinion before embarking on further treaty change.


  1. The questions about economic governance and eurozone governance in particular are basically so intergovernmental that the European Parliament has little say.

    Until democratic government is introduced, new EP elections would be a fallacy.

  2. Normally I would agree, but I think that EP elections could have a positive political effect in that they would confront the electorate with key questions of fiscal union and the approach to the crisis, and allow people a more effective means of debating the options. Although the EP has little power in this area (at least until a treaty change remedies this), it would give the European Council a political push. After all, political fear has rendered the Council pretty slow at dealing with the crisis because they don't know what they can do that would pass their electorates (so they do the bare minimum each time).