Päivi Leino-Sandberg: Adjunct Professor of EU Law, Academy of Finland Research Fellow, University of Helsinki
In June 2012, the European Council outlined “four essential building blocks” for the future of the Economic and Monetary Union (EMU): integrated frameworks for finance, budget, and economic policy, and enhanced democratic legitimacy and accountability. The European Council emphasized ensuring democratic legitimacy and accountability at all levels of decision-making and implementation, stating that stronger economic governance requires stronger legitimacy and accountability.
Despite recognizing the legitimacy issues within the EMU, the European Council’s proposed solutions have been inadequate. This pattern continues in the 2015 Five Presidents’ Report, which offers no concrete solutions in its concluding section on “Democratic Accountability, Legitimacy and Institutional Strengthening”. Centralizing power to EU institutions doesn’t automatically guarantee greater legitimacy, especially when democratic guarantees often function better at the national level.
Several legitimacy-related issues need addressing to ensure the EMU’s sustainability. One example is the unclear division of power between the EU and its member states, particularly regarding economic governance. While economic and fiscal policies are technically under member state control, the six-pack and two-pack measures have increased EU influence, making recommendations effectively binding through sanctions for non-compliance. Due to the urgency and agreement on these amendments, there has been limited public discourse on their impact on the division of competences. The ambiguity in drafting these rules, while sometimes intentional, has blurred responsibilities and increased complexity, strengthening the Commission’s discretionary power and weakening public trust. Simultaneously, member states have engaged in numerous “solidarity operations,” and strict conditions tied to financial assistance have significantly impacted policy choices in recipient countries. The crisis and its management have created a division between creditor and debtor nations within Europe, leaving few feeling fairly treated by the EMU. This perceived unfairness undermines the legitimacy of decision-making and poses a significant threat to the EMU’s long-term sustainability.
Considering the lack of transparency in past decision-making during the euro-crisis, one would expect European leaders to prioritize openness. However, even small steps, like extending Regulation No 1049/2001 on public access to documents to include the European Council, remain unfulfilled. Most decisions addressing the economic crisis suffer from a lack of procedural transparency, with proposals often made late, limiting national discussions and forcing swift action due to fears of EU inaction. This approach further undermines the legitimacy of the decision-making process.
On October 21, 2015, the Commission’s proposed package to implement the first stage of the Five Presidents’ Report raised concerns. The Commission Communication “On steps towards Completing Economic and Monetary Union” reiterates outdated ideas about engaging with national parliaments without offering anything new.
The Finnish Parliament’s Grand Committee had already addressed similar proposals in its 2012 Statement 4/2012, expressing concerns about quasi-democratic rules that undermine true democratic legitimacy. The statement highlighted respecting treaty obligations as crucial for the EU’s legitimacy and criticized the lack of transparency in economic crisis management.
Regarding blurred competences, the package includes a proposal for a Council decision on unified euro area representation at the International Monetary Fund (IMF). While potentially out of sync with the IMF’s decision-making structure, the proposal’s interpretation of Union competence raises concerns. It highlights how recent economic governance measures have centralized economic and budgetary policy oversight at the EU level, establishing the European Stability Mechanism (ESM) as a permanent crisis resolution mechanism for the euro area and implementing a Banking Union with centralized supervision and resolution. The proposal argues that unified representation is necessary to reflect this progress in internal integration. However, it also suggests “full coordination” of national positions within the IMF, raising concerns about what happens if a shared position isn’t reached. Since economic, fiscal, and ESM policies remain under national control, it is unclear whether this further blurring of competences strengthens the euro group’s voice within the IMF or weakens it.
The package also includes a Commission decision establishing an independent advisory European Fiscal Board. Many see this as a necessary step to limit the Commission’s discretionary power in applying economic governance rules and promote objectivity. Operational since November 1, 2015, this board advises the Commission on implementing the Union fiscal framework, provides economic judgments on the euro area’s prospective fiscal stance, collaborates with national fiscal councils, and offers ad-hoc advice to the President.
While these tasks are valuable and could enhance the credibility of EU rules, the public and member states will not have access to this information. The board’s meetings are closed to the public, and transparency is limited to a yearly activity report with summaries of advice and evaluations provided to the Commission.
It is concerning that the Commission, despite establishing this body to assist in its Treaty-based tasks, has exempted it from the same transparency obligations that apply to itself, particularly the presumption of openness and the principle of document access as outlined in Regulation No 1049/2001. Instead of defaulting to transparency, with limited exceptions for protecting financial, monetary, or economic policies, the Commission alone knows the European Fiscal Board’s advice. This lack of transparency contradicts the Treaty and undermines trust in the objectivity and legitimacy of the decision-making process. This approach appears to be a way for the Commission to strengthen its position by justifying its actions with unpublished advice from a seemingly independent board.
The Lisbon Treaty offers numerous tools to address the EU’s democratic legitimacy issues through enhanced transparency, broader citizen participation, and a clearer division of power. However, these reforms remain absent from high-level reports, despite their potential to address the issues highlighted above.
The recent Commission package highlights a fundamental misunderstanding of legitimate decision-making, which hinges on both the process and the outcomes. Instead of treating legitimacy and democracy as secondary concerns, they should be prioritized. An economic policy perceived as illegitimate is rarely effective. This recognition should be the foundation for the EMU’s future development.
Barnard & Peers: chapter 19
Photo credit: voxeurop.eu
[1] Towards a Genuine Economic and Monetary Union. A report prepared by Herman Van Rompuy, President of the European Council in close collaboration with José Manuel Barroso, President of the European Commission; Jean-Claude Juncker, President of the Eurogroup and Mario Draghi, President of the European Central Bank, 5 December 2012. See also European Council conclusions on completing EMU adopted on 14 December 2012.
[2] December 2012, para 14; European Council conclusions on completing EMU, adopted on 18 October 2012, para 15. For a discussion, see e.g. Päivi Leino and Janne Salminen, Should the Economic and Monetary Union Be Democratic After All? Some Reflections on the Current Crisis, 14 German Law Journal (2013) 844–868.
[3] See Päivi Leino and Janne Salminen, “Going ‘Belt and Braces’ – Domestic Effects of Euro-crisis Law”, EUI Working Paper LAW 2015/15.
[4]“Eurogroup chief: ‘I’m for secret, dark debates’”, published by euobserver on 21 Aril 2011, available at https://euobserver.com/economic/32222 .
[5] For a discussion, see Päivi Leino and Janne Salminen, ’The Euro Crisis and Its Constitutional Consequences for Finland: Is There Room for National Politics in EU Decision Making?’, 9 European Constitutional Law Review (EuConst) 3/2013 451–479.