Thank you very much for this great opportunity to address you today. I will try to outline the specific features of EU democracy, have a few words on the Euro, and then try to evaluate whether the process of lead candidates, which was installed for the first time for the European elections 2014, has changed our subject issue of today. But I would like to make some preliminary remarks on principles. I hope they are not too abstract, but I am confident that in a university context, one is allowed to be abstract.
I think we have to analyze the European Union as we typically analyze the federal systems. Federal systems are determined by both vertical and horizontal distribution of power. What does this mean?
- Vertical distribution of course means that there are different levels of governance: there is the federal level; in the US you would say there is the 'State level'; we say we have the European Union level; we have the national level and we have the regional level. But we also have a horizontal distribution of power, which basically means: how do the leading institutions interact? In your case, the House, the Senate, and the Administration with the President; in our case, the European Parliament, the Council - the representative of Member States, which is the other legislative body - and the European Commission - as the Administration, if you want to draw that parallel.
If you first have a look at the vertical distribution of power, we can see that according to the European treaties most of the competences are shared competences. There is very little which is reserved for the European Union itself, basically agriculture, fisheries and space; but there is also very little which is really reserved for the Member States, which is basically education and culture. This is surprisingly little. So everything else is shared competence. In the U.S. system, you have a different approach: you have, in your Constitution, a direct outline of what is the competence of the federal level, and everything that is not mentioned there stays with the States. That is clearly a different approach. What does such a difference mean?
- It means that the transfer of sovereignty in our system - in the European Union - is de facto happening with legislation. You have this wide-open field reserved for community action - everything that is shared competences - which is 85% of potential subject matters, but that field has to be conquered. So when is a new part of that field actually conquered by the European level?
- It is conquered when legislation is being passed, because the moment legislation is being passed, Member States no longer have the right to pass different legislation in the same field.
1) We have to make this clear from the start, because this first point is not always understood. The moment we have European legislation in a specific domain, then this is a domain which becomes reserved for Europe. This is a principle which the European Court of Justice has established as the 'supremacy of EU law over national law'. So the moment you have EU law, the Member States are no longer entitled to legislate on the same issue. This is the first principle.
2) The second principle the Court of Justice has accepted – and I am very rarely citing legal principles because my studies made me an economist – is the 'direct applicability of EU law'. When we have European law, it becomes directly applicable. I think it is important to have this in mind, because very often there is an excessive focus on large Treaty changes. Treaties are very important, but if such an assertion leads to the conclusion that the European integration progress can only happen with a new Treaty, then it leads us straight into a dead-end. In fact, the integration process between Treaty changes can happen very much by conquering the 'empty territory' which is not yet occupied. Thus, European Integration happens in a step-by-step process, by filling in the blanks.
And that’s the image I am always having in my mind: this is just like an empty sheet of paper on which a little bit of one corner would be reserved for the Member States – no discussion – and a little bit of the opposite corner would be reserved for the European Union – no discussion. But the whole rest is open. So it just depends on the following question: can you legislate in this area? And if you can, then the issue moves to the European level.
4) The fourth point which I would like to make is that the majority rules in Council ensure that integration steps are happening in a need-based fashion. The Council normally uses qualified majority voting. But in practice Member States are very hesitant to put one of them into the corner. So if they can, they really try to achieve a consensus among themselves. If it’s really impossible, then they may have to tell a Member State that they have to go forward without its support. But in the Council, Member States really try to bring everybody on board. This assures that we are only integrating, or moving forward, or 'filling the blanks' if more or less everybody is convinced that it has to happen and that it is necessary. This means that integration through legislation in the European Union is need-based. Some researchers have also called this as 'integration on the brink'. Jacob Funk Kirkegaard, from the Peterson Institute for International Economics, whom we discussed with this morning, has described this process very well during the financial crisis. He noticed that, yes, Europeans have been making enormous steps forward towards integration. But he remarked at the same time that Member States are only ready to concede such steps when they find themselves with their back to the wall. And because Member States are only ready to concede once they have their back to the wall, when you have a closer look at what is being done at European level -even if you approach the question with a more critical eye - like it has happened during the recent 'review of competences' carried out in the United Kingdom, finally the review leads more or less to the outcome that probably the division of competences is right. The experts that have reviewed the competences of the Union in the UK couldn’t really identify large sectors which are managed by the European Union and which shouldn’t have been. And that is because the Council is deciding this by qualified majority and, in fact, only going into new areas when 'on the brink' and when necessity has been proven. If I can give you one example from recent times, this would be the one of the banking supervision. Banking supervision was achieved through legislation. It’s very fair to say that the moment you move banking supervision - with potentially all banks of the Member States concerned - to the European Union level, this is a massive transfer of sovereignty though legislation. Because if the Member States no longer have the right to supervise their own banks, it means that they basically lose control of large parts of the management of their economy, because banks are not a sector of the economy like other sectors, banks are in reality the basis of the economy. And from now on, this is an European institution - the European Central Bank - which is deciding whether a bank has to recapitalize, change management or, in extreme case, be closed. These are very far-reaching competences. So, in the case of banking supervision, there clearly has been a transfer of sovereignty, not through Treaty change, but through legislation.
5) The fifth point I would like to mention is about the so called intergovernmental method. There has been a very long debate about intergovernmental method versus community method. And of course, in the European Parliament, we don’t like the intergovernmental method. But I think it is a fair description - when you have a closer look - to say that very often - not to say always - the intergovernmental approach is the first step of integration. The intergovernmental approach is already preferable to not coordinating at all on the European level. And then coordination at inter-governmental level usually leads to a second step, to moving the issue into the community domain. Why is this second step so regularly happening?
- I think there are basically two reasons. One of the reasons is efficiency. Even for Member States, it’s not very easy to decide among twenty-eight. Economists would say the transaction costs are high, because you need to pay off the twenty-eight's Member States to come on board. And the twenty-eight's Member States might have very strange ideas of what they would like to receive in compensation for making unanimity possible. So it’s a very costly procedure, even for Member States. This is the reason why after some time, Member States themselves come around and say: “Look, we would all be better off if we move it into the community method”.
The second reason is legitimacy, because, at the end of the day, it is not very legitimate for national governments to take decisions together, which are no longer really controlled by national parliaments but are not either really controlled by the European Parliament. I am making this point because in the last years we have had a debate to assess if the intergovernmental method was actually moving us forward. Personally, I am optimistic. I think the intergovernmental method was chosen in times of crisis when nothing else was really available. I believe that the short-comings associated with the intergovernmental method will be identified, understood and overcome. And finally, we will see a step-by-step integration into the normal community method.
6) The sixth point I would like to make: very often, moves forward appear far too slow in the European Union. But on that point too, I would like to remain optimistic. When you look at developments from a historical point of view, then integration is happening at the speed of light. In order to see that, one needs to take a bit of historical distance. I believe that we are in a process of about a hundred years of integration struggle. And sixty-five years are already passed, since the early 1950’s, and thirty-five are still ahead of us. And of course a hundred years of struggle is always better than a hundred years of war, as we already had between Great Britain and France. But it means you need to be a bit patient, you need to take the longer historical view. And for that, I think, being here in this country can help. This can help very much to assess our own speed towards integration. We remember for instance that only in 1913 was Congress granted the right to implement direct federal taxation. From 1776 to 1913, that is about a hundred and forty years, so it took quite a long time. We still have a good chance in the European Union to break that record. By the way, do you have an idea of what the federal budget was at that time, in 1913? The federal budget was about 1% of GDP. The global budget of the European Union is 1% of GDP. Only in 1913 did the United States introduce the direct election of Senators. Hundred-and-forty years after Independence… So maybe we shouldn’t be too pushy with the calendar. We still have some years to go and we can take that time. But I think that it helps to take this historical comparison. We cannot compare everything, but it helps us to see the more long-term type of trend in which we hopefully are.
7) The seventh point I would like to make is that in a system of multi-level governance – so we are speaking here about vertical distribution of power – democratic quality is decided on all levels of the system. Of course from the point of view of the European Parliament we very much like to focus on the European Parliament. I believe this is essential, this is crucial, this is the key. But this is not the only question, because the democratic quality is also decided - for example - by transposition in the Member States. Is the quality of transposition good? Is it bad? It is often national parliaments, regional parliaments – as in the case of Germany – which decide. So those levels also have co-responsibility for the quality of the democratic process in the European Union. And who controls the national executives when they are legislating in the Council? That’s a responsibility for national parliaments. This means that the democratic quality of the decision process in the European Union has to be achieved through some kind of cooperation between the European Parliament and the national parliaments, where they have a specific responsibility. And that I think could lead to a very interesting work program for a constructive rethinking on the role of national parliaments. Too often – when we are having this debate – the spontaneous reflex is “give national parliaments a right to veto”, not a yellow card, but a red card. Already now European legislation takes on average seven years, so if we have the ambition that it should rather take eight years, nine years, ten years or fifty years then it’s very important to introduce additional veto players. But if we have the impression that, in times of globalization, seven years from the first idea to implementation is already long, then we should rather try to compress this and find a more constructive role for national parliaments in the process. That would be my position.
8) The eighth point is that democratic quality has to be assured over the whole legislative cycle. Parliament is coming from a situation where originally we were not very strong. Then we received massive competences in amending and adopting legislation. So there is now a very strong focus on amending and adopting legislation in the European Parliament, and it is fine. But of course it’s not the whole process. The whole process starts by the following question: who is setting the agenda? As you know, if somebody else is setting the agenda then 80% of the decision is made by this somebody else.
Do we have mechanisms to review existing legislation before we adapt the legislation? It’s something we call consultation. And then of course we need to amend legislative proposals. But then we also need systems of scrutiny, after the legislation has passed.
So what we try to do currently is to change the business model within the administration of Parliament to a business model which is covering the whole cycle of legislation, from agenda setting, consultation, to amendment and then to scrutiny. In that field - comparatively to U.S. Congress - we have been relatively weak. But the move is gaining momentum and the support given to our Members to set the agenda, to consult and to scrutinize is increasing.
9) The ninth point is that the democratic quality is associated with the possibility of parliaments to impact on decisions over the whole cycle and at all levels of governance, which means we have to stretch our own involvement over time, but also to stretch democratic control in space. So, we are inspired by Einstein: time and space, the whole time and the whole space, also including the other levels of governance.
On the horizontal distribution of power the first question is: what kind of system are we having? In the United States you have a system where also horizontally you have divisions of power. You have the House, which is independent; you have the Senate, which is independent, and the Administration: they are all independent actors and they have to negotiate.
The system in Member States in the European Union, more or less in all the cases, is a system of non-independence, but of joint action between a parliamentary majority and the government, the Executive. As a consequence, there are no checks and balances, or very few, on that level. In that sense, the European Union’s political system is much closer to the American system than to the political system in the Member States.
10) The question is now: does the lead candidate concept change the situation?
So you might know that for the 2014 European elections, the Parliament successfully organized a process or helped organize a process in which all the political parties brought forward lead candidates for the Presidency of the European Commission, with the idea that the one who’s winning should then become the Commission's President. So in order to create a stronger relationship between the citizens, this is now the electorate, and then the parliamentary majority which results from the election who is running the Executive. So the process leading to the election of the Executive in the EU is now de facto modelled after the national model. There were very few who thought that we could succeed, especially among the heads of states and governments. This was very helpful as always when you are underestimated. So finally it happened, and Jean-Claude Juncker is now the head of the European Commission.
So the question is: does this mark a shift from the rather American style of political process which we had at EU level, with independent institutions talking and negotiating the one with the other? Are we going to a more traditional national parliament system where you have a parliamentary majority and an Executive which emanates from that and which can rely on that parliamentary majority to get support.
This is even more relevant because not only was Jean-Claude Juncker elected as a person, but before his election he presented a ten-point 'governing program' with five points he already had as a candidate and five points he added after negotiations with the different political groups, especially those which had not supported him in the first place, to create a Parliamentary majority for him; and on that base, Jean-Claude Juncker was elected on the same day at lunchtime. So the new thing is not only that there is now a President of the European Commission coming out of a parliamentary majority and out of an electoral process in which he was one of the lead candidates, but the new thing is also that there is now a kind of 'governing program' which has been elaborated with different political focus in Parliament and which is taken very seriously now by the Commission as the basis for its work. And you can see that whenever the opportunity arises, Jean-Claude Juncker is getting back to this ten-point program.
Russia becomes more aggressive in Ukraine - Then, we need a European Army.
800 000 asylum seekers in Germany - Then, we need an integrated immigration policy in the European Union.
So the Commission remains very much focused on one key message. They’ve taken organizational decisions to restructure inside. They’re no longer having one hundred priorities, but only ten. They only have one spokesperson now and not twenty-eight. They now have one spokesperson with one message, this message being the Ten?Point Juncker's plan.
The creation of a kind of core cabinet in the Commission, with Vice?Presidents, without their own specific DG, points to the same direction.
So what is the experience up to now? I think that the Commission has been provided with the critical support of its parliamentary majority in key situations. This has been the case for the election of Jean-Claude Juncker at the Presidency of the Commission and then for the confirmation of the European Commission as a whole body. It has also been the case with the LuxLeaks, where basically the choice was an inquiry committee, looking for a personal responsibility, or a temporary committee, looking for a way to improve. It was finally decided that a temporary committee would be more appropriate. You could also say that the decision in the vote over the TTIP vote in July 2015 has also been the expression of the same parliamentary majority.
This is of course still very far away from what we know nationally, where the expectation of the governments is basically that they are supported in a 100% of the cases. In our context, the parliamentary majority just rallied on some key issues in key moments, but it is nonetheless a partial move into the direction of parliamentary democracy. We can also see that, at least for the moment, the role of the President of the Parliament has very much changed, because he is in fact now acting as a speaker: he’s no longer just a representational figure; he is the one going out, trying to negotiate with the Commission's leadership, on political compromises on key issues, and he tries to organize and secure the parliamentary majority behind.
A few words on the Euro. There has been recently a Five Presidents report on the issue. You'll find there some clues on the parliamentary involvement in matters concerning the Euro. First, there is a remembrance that already in the Two-Pack, the possibility for national parliaments to convoke Commissioners to discuss excessive deficit procedures and Commission recommendations on their annual budget had been foreseen. In the European Parliament we are now investing very heavily in the scrutiny of the country specific recommendations, on the basis of OECD data and making this public. In the Five Presidents' report, there is again a request for the European Parliament to organize itself better for the Euro area. It’s a very hot debate in Parliament, which, for the moment, remains unresolved. Another hint: the ISM should be integrated into the treaties in a middle-term perspective.