The Blog

Europe Will Go Federal to Deal With Brexit and Grexit

There are still those who assert that everything the European Union needs to do can be done under its existing treaties. Few of these pundits stop to explain why it is that if indeed everything can be done under the existing treaties, everything is not, in fact, being done.

There are still those who assert that everything the European Union needs to do can be done under its existing treaties. Few of these pundits stop to explain why it is that if indeed everything can be done under the existing treaties, everything is not, in fact, being done. So that seems a good question to put to the European Council at its meeting this week. The heads of government would do well to reflect deeply on the present, highly unstable condition of the European Union.

The EU establishment takes comfort in the belief that there is no European crisis whose political dimension defies a technocratic solution and that, therefore, a little bit more temporisation here and procrastination there will do the trick. Radical change seems complicated and unpopular. Instead, things will be okay once Tsipras has returned to his senses, once Cameron has won his Brexit referendum, once economic recovery is underway and when, in 2017, elections in France in Germany have determined the future leadership of Europe.

Rediscovering moral purpose

I differ from that view. This is no routine crisis. The European Union is facing a grave critical moment that has both a moral and constitutional dimension. The moral case for European unification is nowadays seldom heard. Yet Europe's incapacity to deal properly with the refugee crisis, Putin's manoeuvres or the chaos in the Middle East is shameful. And it takes a Pope to remind us of our moral duty to combat climate change. There are too many Europeans who do not enjoy the rights of EU citizenship and yearn to live under a decent regime. The rise of anti-European forces up even into the government of several member states gives the lie to any complacency that the EU's mission is accomplished.

Settling the constitution

The European Council is invited to resuscitate proposals for 'Genuine Economic and Monetary Union'. The original report, which was drafted mainly by President of the European Council Van Rompuy, painted a picture of banking, fiscal and political union. Consigned to the deep freeze in December 2012, the report is now being defrosted by the President of the European Commission. Jean-Claude Juncker knows that the crisis management measures taken by the EU since 2008 to correct and stabilise the European banking system are not enough, that some of those hurried measures need reviewing, and that others need codifying in terms of primary law.

We have reached the limits of the Treaty of Lisbon. On 16 June the European Court of Justice judged the outright monetary transactions of the European Central Bank to be legal - but only just and under certain very specific conditions. In Gauweiler (2015), the Court has followed its earlier Pringle (2012) case-law in moving away from a strict rules-based interpretation of EMU towards a more political appreciation of how the eurozone's single monetary policy should work through to the real economy. Whether or not the Bundesverfassungsgericht, the referring court in Gauweiler, accepts the ruling of the European Court in total, it would be unwise for the EU to risk much more constitutional litigation of this type.

The job of building banking union is incomplete, and EU surveillance and supervision has yet to extend to the non-banking sector. The ECB remains short of the powers it needs to become a true lender of last resort. The eurozone will remain unsafe unless there is much deeper fiscal and social integration. Whenever it comes, the sharing of the burden between EU taxpayers cannot be managed by confederal, intergovernmental methods but only by a fully legitimate democratic federal government. And if the Union is serious about being 'bigger on big things', that government has to be well endowed.

This week the European Council would do well to stop talking obliquely about governance based loosely around itself and start talking directly about government based on the European Commission. It should give Juncker the green light to work towards fiscal union, including drawing up plans to amend the treaties.

A federal response to Brexit

The European Council will also have to start to deal with Cameron's demand to extricate the United Kingdom from the historic mission of 'ever closer union'. Foreign Secretary Hammond told the House of Commons (9 June) that he envisages a reformed EU of two pillars. The British demand is no longer a multi-speed Europe, which we have had for years, but variable geometry on a structural scale. The UK will not take a different path to the same destination, but a different path to a different place. While Britain tries to work out what the second pillar could look like, the rest of the EU needs to get on with the business of defining the first pillar. The British decision to resign from previous treaty commitments obliges everyone else to review existing constitutional arrangements and consider afresh the finalité politique of the European Union.

Van Rompuy says it is not necessary to agree on the ultimate goal of integration before taking 'intermediate steps in the federal direction'. But lack of clarity about the goals of the EU contributes indirectly to the rise of nationalism. Ambiguity about the nature of the 'destiny henceforward shared' - to cite those notable words of the Schuman Declaration - has blunted federalist logic. Equivocation by a defensive EU establishment in the face of hostility from nationalists has clouded the raison d'être of integration. Pro-Europeans have too easily caved in to the eurosceptic mantra of 'national where possible, Europe only where necessary'.

The federalist thesis, on the contrary, does not accept that there is a bipolar choice between 'national' and 'European', but that both levels are legitimate and coordinate. The federalist principle of subsidiarity does not mean that everything can or must be done at the lower level, but that effective action is appropriate at the level that affords the greater added value. Much of the electorate knows instinctively that many contemporary problems transcend the capacity of the old nation states to resolve. Doing things at the level of the European Union has never made more sense than it does today across a wide spectrum of policy. Federalists must articulate that instinct and exploit that logic. There are sound moral and constitutional arguments for continuing the process of European unification even without Britain. It's high time they were made.


For a longer version of this blog, see my speech to the Federal Trust John Pinder Memorial Conference, London, 22 June 2015.