Of Red Cards, Democracy and Subsidiarity

When UK Foreign Minister William Hague made his Koenigswinter speech in Germany last week, his Red Card idea caught the media's attention. Currently if enough national parliaments get together, they can give a draft EU bill a "Yellow Card", which sends it back to the Commission to reconsider it on the grounds of subsidiarity (on whether or not the substance of the draft law is appropriate to be decided on the EU level or not). The Red Card idea is essentially an extention of this, with national parliaments being able to block draft legislation for proportionality and subsidiarity reasons.

So is it a good or bad idea? If it means each individual national parliament being able to block EU legislation, then obviously it's ridiculous. You cannot have national vetos for everything - the Single Market Act introduced qualified majority voting to make the project realistic in the first place. Indeed, the poor quality of the legislation from that period, with Member States adding on caveats, exceptions and exemptions to nearly everything means that it's practically much better that the EU operates in a more open and parliamentary manner than before.

Going back to national vetos will increase the emphasis on backroom deals and lead to poor legislation drafted more by diplomats than democrats. But I don't think that's what Hague was going for (after all, all his talk of furthering the single market would flounder in the face of 28 national vetos); it's more likely that he meant that it would take a number of national parliaments to block draft legislation. I both agree and disagree with Hague on the Red Card idea.

Here's a bit of what he said in his speech:

"The European Parliament plays an important role in holding European institutions to account. It can play a very positive role, as it has along with Commissioner Damanaki in the current reforms to the Common Fisheries Policy. But if the European Parliament were the answer to the question of democratic legitimacy we wouldn’t still be asking it

I think instead that the solution lies in promoting the role of national institutions in European decision-making – because ultimately it is national governments and national parliaments that are accountable to our electorates. They are the democratic levers voters know how to pull. I want to offer some thoughts on how we might do that in a moment

This idea of the right balance between national and European decision-making, and respect for the concepts of proportionality and subsidiarity, brings me to my third key challenge. How can we build a European Union that acknowledges and respects the diversity of its Member States? One that recognises that our national approaches to and ambitions for the European Union may sometimes differ?

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We should explore whether the yellow card provision could be strengthened or extended to give our parliaments the right to ask the Commission to start again where legislation is too intrusive, and fails the proportionality test. And we should think about going further still and consider a red card to give national parliaments the right to block legislation that need not be agreed at the European level."

First of all, I disagree with him that strengthening national parliaments is the only way that democratic legitimacy can be increased (bear with me, I will get to the "agree" point eventually). The Eurozone crisis is a key example of this, with political battles going on within national parliaments, but little pan-European structures in which to express these political differences, debate them, and come to a majority approach while honing the policy to take account of criticism, you end up with an incoherent approach.

For the Cypriot bail-out, it was a clash of national parliaments and national leaders. Much of the resentment can be found in the ad hoc nature of the bail-outs, and how the battles are fought along national battle-lines, with little opportunity to be heard on an equal stage, and with no equal and systemic policy that applies fairly to all. This feeling of political inequality, the lack of political leadership at a European level, and the inability to properly debate and influence the central policy is the fundamental basis of disillusionment with the EU (at least in the Eurozone).

You cannot fix the democratic issues with the EU by adding more institutional complexity and blocking mechanisms. To have political accountability, you need a political space that you can influence to create policy that is accountable to voters. The European Parliament and the Commission, if tied closely to the Parliament, would be the best place to start, because it would give a focal point for debating and making policy that can be influenced via direct elections (even with the Council and national parliaments having checks on them).

Because greater instituional complexity and more blocking mechanisms in the system really leads to greater inefficiency and an inability to reach decisions. If the EU cannot make decisions, then that would lead to even greater disillusionment. (And the next European elections can be a good starting point for debating and influencing the big issues with the EU today - see this article by Simon Hix and Christophe Crombez).


That said, increasing the power of the national parliaments can increase democratic legitimacy in the EU when it comes to "...build[ing] a European Union that acknowledges and respects the diversity of its Member States...". At the moment subsidiarity is hard to define - not the idea that power should be exercised as closely to people as possible, but the day-to-day practice of it. The Yellow Card system was a great idea, but it needs reform (a longer time period for national parliaments to object, and national parliaments need to organise greater communication between them to make better use of the procedure).

A "Red Card" system - with, say, a majority or qualified majority of national parliaments being able to block draft legislation - could be a good way of developing a culture of subsidiarity. When the Commission analyses draft laws for subsidiarity and proportionality, it considers the arguments, but there isn't a clear and objective answer to the question, and nor can subsidiarity be effectively defined in a day-to-day way by the courts. There needs to be a political culture of subsidiarity, based on an understanding between national parliaments (and citizens) and the Commission (and the rest of the Union legislature) about what should be done at the EU level and what should be done at a national or more local level. This can really only be done through political debate and contest, and a Red Card system could give national parliaments the tools to start marking that space.

Of course there will be clashes and debates between the EU institutions and the Member States/national parliaments over this - that's the point! But it's a more effective way of building an accepted idea of subsidiarity and decentralisation in the EU over time than relegating the question to impact assessments and wonkish policy documents.


(As a side-note, here's a graphic explaining how EU laws are made [via Kosmopolit]).

Return of the Currency Commissioner?

The Commission has just launched a blueprint for Economic and Monetary Union (PDF). I haven't had time to read it yet, but from the EUObserver article, it looks like the idea of a Currency Commissioner has returned:

"This time frame would also see "further budgetary coordination (including the possibility to require amendments to national budgets or to veto them)," says the paper.

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Other steps to consider would be giving "clear competence for the EU level to harmonise national budgetary laws and to have recourse to the Court of Justice in case of non-compliance." Final steps to full economic and monetary union would only be taken in the "longer term" and would require "major treaty reform" suggests the paper.

This would likely include a possibly large central budget with stabilisers – meaning money would be transferred to member states in trouble.

“As a final destination it would involve a political union with a central budget as its own fiscal capacity and a means of imposing budgetary and economic decisions on its members.”"

Back in October Germany's Finance Minister, Schaeuble came up with the idea of a currency commissioner that would be able to veto national budgets. It was wrong then, and it's wrong now - federalism does not mean this sort of centralisation. As I wrote last month:

"You cannot "depoliticise" the fundamental matter of national budgets, because you cannot pretend that budgets and economic issues are simply matters of technical wizardry, with expert options being implemented for desired outcomes - desired outcomes are political matters, and deserve a meaningful airing in a publically accountable body: the national parliament. While there is an argument for certain budgetary contraints on Eurozone Member States to ensure the functioning of the common currency - in exchange for solidarity between Member States, it should be stressed - at the end of the day Member States should be able to set their own budgets.

Rather than trying to come up with tighter and more rigid and better enforced rules for the Eurozone, we should be working to divorce banks from the sovereigns to make banking a European matter within the Eurozone, and creating a system where Member States can go bankrupt, without endangering the system and with some support for recovery after bankruptcy. A flexible and politically accountable system would work much better than Schaeuble's approach - there needs to be political accountability for national budgets at the national level, and at the European level for those elements of European solidarity."

This idea should be killed off, and killed off quickly.

Excessive Deficit Regulation

The Excessive Deficit Regulation (PDF) builds on the six-pack legislation’s provisions on budgetary surveillance.

The Regulation

The Regulation would establish a common budgetary timeline (mid-term budgetary framework to be published by 15^th April, draft budget laws published by 15^th October, and budget laws should be adopted by 31^st December), and require the creation of national independent fiscal councils for monitoring the implementation of national fiscal rules for achieving budget balance.

For budget monitoring, the relevant information is (simplified list taken from Article 5(3)):

(a)    The targeted budget balance as a percentage of GDP;

(b)   The projections at unchanged policies for expenditure and revenue as a percentage of GDP;

(c)    Targeted expenditure and revenue as a percentage of GDP;

(d)   A detailed description of measures to be included in the budget to bridge the gap between the targets in (b) and (c);

(e)   The main assumptions about expected economic developments and important economic variables, based on independent macroeconomic growth forecast;

(f)     Any additional indications on how recommendations to the Member State will be met.

The Commission will give its opinion on the draft budgetary laws by 30^th November, and national parliaments can require a Commission presentation to them. There will also be an overall assessment for the Eurozone.

When a Member State is under the excessive deficit procedure it falls under closer budgetary scrutiny, with regular reports to the Commission on the execution of the budget on the general government and sub-sector levels. Under Article 7(6), the Commission can require a Member State to carry out and report on a comprehensive independent audit of its accounts and provide additional information on its progress on the excessive deficit. The Regulation would increase the Commission’s power in monitoring Member States’ budgets and involvement in budgets where there is an excessive deficit procedure in force.

European Parliament Report.

For the Economic and Monetary Affairs Committee, Elisa Ferreira (S&D) drafted the report for the Parliament’s response at first reading. The report was endorsed in Committee by 18 to 12, with 14 abstentions, and in plenary by 501 to 138, with 36 abstentions. The report was endorsed by an EPP-S&D-ALDE-Greens/EFA coalition.

The report submits 81 amendments that will be the Parliament’s starting negotiating point with the Member States in the Council. The main changes are:

- Greater reference to employment and social partners to be added to the recitals;

- It would add (non-binding) calls for a Financial Transaction Tax and a Common Consolidated Corporate Tax Base to the recitals;

- Specifies that the Regulation does not affect wage formation or collective agreements;

- Would define “particularly serious not compliance” as a deviation of 1% GDP in one year or an average of 0.5% GDP each year for two years from the budgetary objective if there are no exceptional circumstances;

- Gives some more flexibility with the deadlines;

- “Expected economic developments” will include an estimation of the assumed macroeconomic multiplier effects (so stimulus packages can be taken into account);

- Specifies that the Commission’s power to specify content of draft budgetary plans is through delegated acts, which brings it under closer control and scrutiny by the Parliament and Council;

- The European Parliament can also require that the Commission present its budgetary plans to it and the relevant EP Committee, as well as the Eurogroup, will discuss the Commission’s opinion on national budgetary plans and the budgetary situation in the Eurozone. The Commission may update its opinions in the light of these discussions;

- Overall assessments of the Eurozone shall also include stress tests that provide “an indication of the risks to public finance sustainability in the event of adverse financial or budgetary developments.”

- The requirement of Member states to report debt issuance to the Commission and the Eurogroup will be included;

- The Commission will be required to present a report on a roadmap towards Eurozone Stability bonds and present a proposal for a Eurozone sustainable growth instrument aiming at mobilising approx. 1% GDP per year over 10 years, including an increase in EIB capital and project bonds, to be invested in European infrastructure, science and technology;

- Eurozone Member States may agree an annual coordinated public debt issuance framework (this is for a future proposal, however);

- A European Redemption Fund shall be established based on joint liability and strict conditionality for 25 years (after which it will be wound up), covering debt over 60% GDP of non-assistance programme Eurozone Member States on a roll-over period of 5 years. There will also be a fiscal consolidation strategy and a structural reform agenda. The ERF’s day-to-day management will be under the Commission following a regulation by the EP and Council;

- Under the excessive deficit procedure, the relevant Member State will present its national plan, including areas of European Added Value, such as EIB credit lines;

- The Commission shall present a report, and possibly a proposal, on a European Debt Authority to the Parliament and Council that would be responsible for managing and coordinating all issues relating to the annual debt issuance plan of the Member States.

Thoughts

The report is clearly very ambitious, particularly inserting the creation of a European Redemption Fund, likely as a way of aiding Italy and Spain. The Parliament is keen to introduce a greater scope of variables to the process and to highlight the importance of social partners, respect for wages and collective agreements, and European solidarity through national plans indicating EIB and other economic help. It’s also clear that the Parliament is using this opportunity to push its ideas on to the agenda and to overcome being overshadowed by the European Council summitry that’s dominated the past 2-3 years of crisis. The Parliament has also tried to introduce more democratic and parliamentary controls over the Commission’s power, especially in ensuring the oversight of its delegated powers by the Parliament and Council. By reserving a right to demand Commission reports and the right of debate, the Parliament tried to ensure that all these plans are open to political debate and discussion.

Still, the need for the Parliament to cram requirements for further reports and debates on further aspects of Eurozone reform highlights how one-dimensional the current “fiscal union” is. The more radical elements are sure to be thrown out or heavily watered down – I don’t expect to see the redemption fund survive negotiations with the Council – but there are some grounded ideas for improving the content of reporting, planning, and of improving democratic oversight.

Division of Labour: Subsidiarity and National Parliaments

Subsidiarity. If you're still reading, congratulations; your courage in the face of EU jargon is impressive.

Subsidiarity is the principle that decisions should be taken at the closest possible level to the public, where that decision can be meaningfully taken. It's a principle that everyone will find attractive and agree with - how could you possibly be against? I support the idea, but when Nosemonkey asserted that giving subsidiarity true meaning and force would improve the EU and its legitimacy during the first Bloggingportal event panel, my first thought was a bit sceptical:

"Subsidiarity is probably one of the most tricky #EU legal concepts - how can you define it?"

Jon Worth replied:

"@EuropeanCitizen Subsidiarity is a conveninent cover for doing what you want to do, at whatever level #EU #EUuk - or am I too sceptical?"

Keeping decision making power at the lowest level possible where it would be effective is clearly a political ideal, and how to impliment it in practice causes a lot of difficulty. Since I study law, my mind immediately jumped to the European Court of Justice - after all, it is the institution which interprets the Treaties and which would rule whether or not the EU was acting within its competence or not. To my knowledge, the ECJ has not once found a breach of subsidiarity, and I am not aware of there being a test for subsidiarity, simply because it is so political it defies easy judicial interpretation.

I don't want to be misquoted here that subsidiarity is meaningless and the ECJ does nothing to limit EU power, because there are other, better, legal tools for doing so. The other 2 legal principles are those of conferral (the EU only has powers given to it by Treaty) and proportionality (EU actions must only so as far as is necessary to achieve their aims). (See Article 5 TEU). The Tobacco Advertising cases (I & II) are good examples of these principles being used (though arguably proportionality should have been more thorough), and the key point was that the internal market concerns cross-border trade, so the EU can only rely on those law-making powers to create laws that ease cross-border trade, not for health or for goods that would be fixed and not cross borders. These principles are either straight-forward or there is good judicial experience in the Member States to draw on to inform how they should be used. But when it comes to subsidiarity, what does it add to the judicial decision-making, and how could it be applied?

Subsidiarity is political, so it would be best enforced through political channels. The Lisbon Treaty gave the national Parliaments the ability to force the Commission to reconsider proposals if enough of them (at least 9) considered the proposal to breach the principle of subsidiarity. (See Protocol 2 of the Treaties). The time limit of 8 weeks is too short for it to be very effective, however, given the amount of co-ordination and co-operation that needs to take place among national parliaments. It does give them a useful tool which could be used effectively when the national parliaments organise themselves (which will take time and depend on their political will), but the time limits need to be extended. Open Europe has made this point, and it's a good one.

At the moment the Commission does a "check" on its proposals - do they conform with the Charter of Fundamental Rights, do they conform with the principle of subsidiarity, etc. The ECJ is likely to take political decisions on subsidiarity as being within the legislative discretion of the EP and Council and focus on other legal questions, but challenges from the national parliaments may force the ECJ to take it into account more (though it will be a long time, since it will more likely decide on procedural issues and on other legal grounds rather than face the difficult and politicised task of defining subsidiarity). Effective political channels are the best way of making subsidiarity more meaningful.

A last point on the role of national parliaments in the EU. At the Bloggingportal event, Mat Persson of Open Europe remarked that their role should be expanded beyond subsidiarity checks. To me, and I'm open to correction, this means national parliaments having a legislative role in place of or parallel to the EP. I'm completely against this. It would be good for national parliaments, through their committees to keep tabs on and control the votes of the national ministers in the Council, but becoming the "second chamber" of the EU would be damaging to transparency and accountability. Though the EP is not loved and turn-out is falling, it does, at least, provide an open, full-time forum for debates on EU legislation and scrutinising the executive.

National parliaments, on the other hand, tend to have little time of EU affairs, and their effectiveness varies from country to country on the powers they do have regarding the EU. Separate debates in 27 (or more) arenas in different languages would mean that the debates will become harder for the public to follow. Inter-parliamentary deals (alliances and deals made in now smokeless rooms) would be even more decisive for the legislative process. Though the EP has a low turnout and political organisation on a continental scale is more difficult, at least it provides the possibility of influencing the way EU legislation is dealt with and of expressing opinions more directly to the EU institutions about what they should be doing. Having the national parliaments take over would damage the transparency and accountability the EP provides (or potentially provides), and could even reduce the EU's legitimacy.