The continued economic crisis of 2008, increasing population, decreasing natural resources, and dominant powers of some nations, is contributing to world crisis. The debate pertinent to accelerating EU integration, diminishing acceptance of European Union (EU) citizens, substantially growing Euro-skepticism, and strong tendencies of re-nationalization are fueling the discussions in legal, political, and media alike. The last years can therefore, be characterized as turbulent as we continue to face complex challenges, leading to unemployment and other economic and political problems driven by societies in the Member States. The function of traditions is to maintain social stability. Although traditions seem stable, they change and renew from time to time depending on changing circumstances (Shils, 2009). Given the circumstances that directly and indirectly affect the EU -actors and laws, raises questions as to what extend the core principles, pillars, embodied institutional structure and legal framework are still profound and adapted enough to continue the traditions to meet their obligations.
Since many subject matters and factors play a role in the discussion of EU integration, this assignment will present some aspects of frame work and its operational ramifications to sketch a picture the EU situation in terms of its traditions in general and the current economic/debt crisis in particular. In addition, some of the issues related with role, powers and legal aspects are discussed.
As the Euro-economic-crisis continues to drag on, it is no longer just the continent that is divided, but also the countries themselves. In order to better understand the development of the EU framework, given its profound internal differences and limitations, a historical perspective is reviewed. Further discussion includes the EU institutional and legal framework, ramifications and powers, role of entities and legal framework, the EU legal principles and current crisis and conclusions.
European Union: historical perspective
The history of the European integration over the last 67 years can be marked by changes and modifications. For most of the history, European countries were rivalries territories consisting of kingdoms, duchies, and city states. They were bound by language and culture – and raven by tribalism. The European integration culminated after the Second World War with the principal objective of ending frequent wars in Europe. In order to restore heavy industries and create a basis for economical collaboration and war prevention, the Coal and Steel Treaty (ECSC Treaty) was created in 1951. (European Union, 2012)
Building on the success of the ECSC Treaty, the 6 founding countries, such as Germany, France, Italy, the Netherlands, Belgium and Luxembourg. expanded their corporation in other economical sectors and created the European Economic Community (EEG) by the Treaty of Rome that formed a common market, followed by joint control on a common agricultural policy. In 1963, the EU signed its first international agreement with 78 countries (APC agreement – Africa, Caribbean and Pacific). A year later, the founding countries abolished custom duties and establish free cross-border trade. To maintain monetary stability, the first plans for a single currency were made in the 1970’s, and concrete action was a flexible exchange rate system with narrow limits to prevent currency fluctuations. Meanwhile, 3 new members entered the EU. In 1979, it allowed EU citizens to elect members of the European Parliament for the first time. The expansion of the EU continued. In 1981, EU consisted of 9 member states. (European Union, 2012)
Despite the free trade between Member States in 1968, trade was not circulating freely across EU border due to differences in national regulations. Therefore, the Single European Act (SEA), a major revision of the Treaty of Rome was enacted. It gave the European Parliament more power. In 1987, the EU stimulated education by setting up programs to fund university student exchange in other European universities. (European Union, 2012)
In the beginning of the 1990’s, several Balkan countries broke apart and a civil war started in Croatia, Serbia and Bosnia and Herzegovina. Rules for the future single currency, foreign and security policy and close cooperation, and signed the Treaty on European Union. In 1993, the EU passed over 200 laws to open borders and enhance the single market. The EU expanded by adding new member states and included a majority of west European countries with total 15 members and created the Schengen Agreement in 1995, allowing travel without passports in Belgium, Germany, Spain, France, Luxembourg, the Netherlands and Portugal. Plans to reform EU institutions containing a stronger participation in world affairs, employment, and right of citizens were made in 1997 by signing the Treaty of Amsterdam (built on the achievements of the Treaty from Maastricht). The EU leaders started negotiations with additional countries of central and eastern Europe. In 1999, launch of the Euro forced an unwanted intimacy on Europeans. The Euro entices separatists to strike out on their own, figuring even small nations can survive if they share a currency (Malta, a Euro-zone nation, has fewer people than Dublin or Dresden). (European Union, 2012)
EU consisting of 25 countries signed a treaty which established a European Constitution to democratically expedite the decision-making process. It also appointed Ministers of Foreign Affairs. Democracy, efficiency, and transparency became essential. As a result, 27 Member States signed the Treaty of Lisbon which became effective in 2009. (European Union, 2012)
Framework, ramifications and powers
The legal framework of the EU cannot be categorized to any traditional legal structure. The EU law can be defined as a ‘dual’ model as it contains both international and domestic law. It has lead to policies based on common legislation and can be characterized by its binding force on Member States. Therefore, common policies are created by legal acts agreed by common institutions. (Eleftheraidis, 2010)
Most domestic/national laws, are harmonious in different areas within the context of applied common policies. Based on treaties (mostly concerned with TEU & TFEU), a law known as ‘Acquis of the EU’, shapes common policies which impose and initiate precedence over national and constitutional law of Member States, unless a Member State decide to opt out its contract with the EU. (Borchardt, 2010) Therefore, the integration process is that in case a Member States do not opt for measures enforced by the EU, they cannot contravene EU legislation by invoking national and constitutional law. It should be noted that legal instruments have only legal effect(s) if a treaty provision empowers the competent institutions (e.g EU Parliament and/or Council) to enact them, which is based on the principal of conferral or attribution. Although regulations, directives and decision are entirely binding, two other legal instruments such as recommendations and opinions do not have binding effect (Article 288, TFEU). The EU by decrees permits national legislation to the EU legislation.
Concerning other legal instruments specifically the directives, it binds Member States that should be achieved and that Member States need to ensure fulfillment of the obligations resulting from the treaty or resulting from an action taken by the institutions of the Union (Article 4 TEU). The directives define the objective(s) by common policies, and offers space to Member States to select forms and instruments in order to comply with the directive(s). However, implementing directives should be conducted within a given timeframe not to infringe EU legislation. Concerning the decisions, it can be said that that EU laws which relate to specific cases originating from the EU Council/Commission are fully binding. The decisions are extracted from quasi regulations or directives and support specific administrative aims and are addressed to specific parties, unlike regulations as the EU Commission states. As stated earlier, these are binding effects and apply uniformly to committed parties. However, in case an EU law is infringed, the EU is able to stop infringements where necessary by the case of Court of Justice of the EU (ECJ). In order to stimulate and conduct objectives of the common policies, the EU has legal instruments such as recommendations and opinions that have no binding effect, although they function as harmonization mechanism. These non-binding measures suggest that the political desire to act within a given area to provide guidelines for coordination of national legislation without any legal enforcement.
The legal instruments are utilized by the EU that consists of numerous institutions and agencies that enables the Union to operate. The ‘institutional triangle’ defines the fundamental basis policies making and decision making by the Council/Commission (Article 17 TEU) and the EU Parliament. The institutions consist of several judicial bodies, such as the Court of Justice of the European Union (Article 19 TEU), the Court of Auditors of the European Union (Articles 285, 286 TFEU), and the European Council (non legislative function). The framework extends with consultative bodies such as the European Economic and Social Committee (Article 301 TFEU) and the Committee of the Regions (Article 305 TFEU). With so called ‘other bodies or also referred as to advisory bodies’ such as the European Investment Bank (EIB), European Investment Fund (EIF) and the European Central Bank (ECB), (Articles 129, 130 TFEU) and the Ombudsman. It also has multi decentralized agencies in various areas that also referred to as community agencies. It has agencies in the fields of common foreign policies, police and judicial cooperation in criminal matters.
The main objective of these entities is to provide expertise in various fields to provide vital information for the decision-making process. These agencies are the result of growing workload of the Union and continuous expansion of its activities, and are coupled with a substantial increase in complex nature of its attributions which lead to the need of delegation of some of its policy implementation functions to the decentralized agencies. (Schammo, 2011)
Role of entities and legal framework
With regard to constitution of the European Union, many theoretical speculations raised as the Treaty granted the European Union an explicit international legal personality (Article 47 TEU). The legal nature was already set out in two judgments of the Court of Justice in 1963 and 1964, which were related to the EEC, and the judgments (case Van Gend & Loos and Costa v Enel) are still valid for the EU in its current form (Borchardt, 2010). This characterizes special legal nature of the EU, and thus is the EU, an autonomous entity, also called ‘supranational organization’ within legal circles, with its own sovereign rights and legal order independent of the contracted parties.
There are questions marked by the democratic principles as stated in reformed treaties (Article 6, 9 and 12 TEU), as EU is not a showcase of democracy (Bogdandy, 2011) as it has never been founded democratically, while the EU states that the instruments used by the EU are to promote democracy, human rights, the rule of law and good governance (Borzel and Risse, 2004). The technocratic approach and non-democratic founding has always been the argument for right-wing parties not to support of the EU. The lack of democratic credentials were also part of the legislation process as the original procedure contained mostly consulting of the Parliament and included cooperation with the Council and provided power of co-decision in the legislative process. Enhancing democratic credentials were made under the Treaty of Lisbon (Borchardt, 2011).
There is a widespread agreement that the democratic questions have become very pressing and there is insecurity about how to address the issues (Bogdandy, 2011). At the same time the EU deals with a growing needs, enforced by its contracted parties, of openness and better involvement which is fully recognized and underlined by the commission of the European communities (European Governance, 2001). The white paper on European Governance stated that the Union must renew the Community method by following a less top-down approach by setting up principles of good governance to establish democratic governance. Key words as openness, participation, accountability, effectiveness and coherence regarding the decision-making process, policies, legislative and executive processes and related actions should lead to respond sufficient for challenges within that specific time. (European Governance, 2001)
Considering the ambitious reforms outlined in the white paper (Commission of the European Communities, 2011) give rise to doubts about the influence, powers, performance and risky effects. The agencies gained more control as the Council/Commission established these agencies and gave them decentralized autonomous function. The agencies function free of political influence and act independently from the law and politics, which provides vital information for the decision-making process (van Ooink, 2005).
Since effectiveness is needed, it automatically opens up a Pandora box of issues relating to independence, control and accountability of the agencies as anxiety arose of escaping accountability and control of these agencies (Busuioc, 2011). The need for agency control and accountability therefore, originated and was recognized by the European Parliament and the Commission (Commission of the European Communities, 2005). The terms accountability and independence are conflicting concepts due to the fact that they lack clear differentiation that stimulates debate on the function of the agencies (Busuioc, 2011). Control ’used in the Anglo-Saxon sense, is broader than accountability and can include both ex-ante and ex-post mechanisms of directing behavior. Control means ‘having power over’ and it can involve proactive means of directing conduct, for instance, through straight orders, directives, financial incentives or laws and regulations. But these hierarchical, financial or legal mechanisms are not mechanisms of accountability per se, because they do not operate through procedures in which actors are to explain and justify their conduct to forums (Busuioc, 2011).
Accountability is concerned with ex-post oversight, with ascertaining after the fact, to what extent the agent has lived up to its ex-ante mandate and has acted within its zone of discretion. Thus, as defined by Bovens, accountability is a relationship between an actor and a forum in which the actor has the obligation to explain and justify his/her conduct, the forum can pose questions and pass judgment, and the actor might face consequences (Busuioc, 2011). In addition, the European Union suffers from serious accountability deficits (Boven, 2006) and there are serious issues with regard to the delegation of powers, discretion and the lawfulness of decisions taken (Schammo, 2011).
European Union legal principles and current crisis
During the early 2010, it became apparent, that public debt of few EU Member States had reached alarming proportions. Although reform of the Lisbon Treaty was successfully ratified, the EU crisis with diminishing integration continues to baffle law makers and politician alike. Renationalization efforts among the EU countries with possible breach of EU law, lack of political leadership assume the current crisis goes beyond earlier difficulties of the integration process. The European Monetary Union (EMU) had not particularly been in focus as its legal foundations were already established in the Treaty of Maastricht (1993) and the Stability and Growth Pact (1997) and therefore, modifications of pertinent EU law by the Lisbon Treaty were not significant (Ruffert, 2011). It could be argued that creation of effective legal system/instruments to deal with the crisis within the EMU served as a deficiency in the treaty process. The legal and political instruments of the debt crisis are challenged and economic governance is under scrutiny.
Shortly after the Lisbon Treaty came into force, the first troubling signs of the debt crisis became visible as mentioned and Europe’s struggle to pay debts has build up tremendously in recent years and mostly countries like Greece, Portugal, Ireland, Italy and Spain have failed to generate sufficient economic growth to meet their economical obligations. An immediate danger of possible default was seen for these five countries and it became clear that these economical issues have far-reaching consequences that extend beyond borders. This striking development did not only enacted the European Union to take measures immediately, but it also raised substantial questions and doubts about the functioning of European economical governance and attached legal principles.
As the Greek drama, characterized by large public debts that increased rapidly continued, the European Union developed a rescue package in May 2010. The involved parties such as the Ministers of Economics and Finance of the Euro group, Greece, the Member States and the IMF came up with and loan agreement of €110 Billion. Political modifications were also introduced such as lowering the interest rates and extending maturity up to 7.5 years. Following these actions Euro zone countries were introduced to a larger disbursements. The European Council and the ECOFIN-council immediately created a rescue plan, and later on the ESM (European Stability Mechanism) was set for all EU members. Afterwards the implementation was closely surveyed and monitored by the Commission, ECB and IMF (‘Troika’). (Ruffert, 2011).
Article 125(1) (TFEU) states that a bailout by the Union or by one of the Member States is forbidden. Therefore the bailout reforms immediately breached the EMU’s rules. The argument that was brought up by the EU was that it needed to force Member States to take up loans solely under the conditions of the financial markets and thus to consolidate public spending for the benefit of the stability of the common currency (Ruffert, 2011). As the issues with Ireland and Portugal rose, a new legitimate legal basis was interpreted by an emergency clause and attached regulation(s). Article 122(2) of TFEU allows bailouts activities of the EU via financial assistance by saying “when a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control” (Article 122(2) TFEU). Ruffert (2011) also explains that the fulfillments of the conditions of article 122(2) TFEU must be checked in every single case. However, he also adds that it is certainly difficult to determine whether the cases of Ireland and Portugal were an ‘exceptional occurrence’ or not.
Another issue that rose after the ESM became into force, was that the legal control was excessively reduced which lead to various practical conflicts. As Article 3(1) TEU focuses on the economical perspective of well being of the people, for example the price stability. The ESM conflicts the Treaty of Maastricht and the Stability and Growth Pac due to the fact that both treaties do not allow emergency related intervention because this would jeopardize the budgetary and financial policies of the Member States (Ruffert, 2011). In addition, it can be notified that the ESM failed with respect to those countries who has excessive deficits as financial sanctions turned out to be limited help. When the agreement was made on the European Semester that basically required Member States to submit their midterm budget strategies in order to let the EU act properly with regard to taking relevant policies, it turned out that Member States did not comment modification of the corrective mechanism. The fines that were given to Member States who exceeded their budgets (Article 126 TFEU) had apparently no effect as they simply did not have sufficient funds.
Unfortunately, no provision states what would happen in the event of a Euro-area losing access to the market (Ferry, 2012). It leaves many interpretations of the treaty (Article 125 TEU) open, such as restructuring its public debt, turning to the IMF and to be subject to standard procedures for conditional support or, if necessary, insolvency. A third interpretation could be that Member States could or need to find ways to provide temporary conditional assistance. That was therefore significant ambiguity in the interpretation of one of the treaty’s fundamental principles (Ferry, 2012).
In December 2011, EU lawmakers agreed on the so-called “Six-Pack” of economic governance reforms (European Union, 2012). The reforms strengthened the Commission’s power of fiscal surveillance and strengthened the sanctioning procedures under the Excessive Deficit Procedure (European Union, 2012). In February 2012 EU leaders, together with twenty-five governments, signed the Fiscal Compact Treaty. The treaty simply restated and raised the profile of measures already agreed on the ”Six-Pack” and also changed the EU’s approach in crucial respect. Previous approaches to ensuring fiscal discipline had precluded a role for the judiciary and had relied on the EU-level political institutions such as the Council and Commission. (European Union, 2012)
The Compact Treaty sought to both decentralize and judicial fiscal discipline, requiring all twenty-five signatory states to enshrine a balanced budget rule and an automatic correction mechanism (debt-brake) in domestic law and to enforce these rules through national courts (Kelemen & Terence, 2012). Scholars (Kelemen & Terence, 2012) argue that this treaty enhances transparency and prevent fiscal deception, but other central elements of regime, those that focus on judicial fiscal policy, are unlikely to function as hoped, in part because their design is based on a misunderstanding of the role law and courts plat in maintaining fiscal discipline.
If we look now at the practical perspective of implemented reforms and saving measurements we can witness the difficulties arising from the regional disability/unwillingness to accept the proposed actions. Some of the strongest resistance to centralized banking regulations come from banks that are owned or controlled by regional governments or their favored partners. Regional autonomies have allowed local elites to gain stranglehold and are therefore unable to balance the external saving requirements and internal unwillingness of acceptance. It is clear that there is no easy way out. As Camila Vammale, economist at the Organization for Economic Cooperation and Development in Paris explains, making each regional government responsible for its own finances would widen the gaps between rich and poor, although it is possible to design aid that would induce less moral hazard.
The debt crisis is spilling over also on different issues in the countries. If we look at the example of Spain, the economic crisis is used as an argument for protracted conflict between the government of Spain and the province of Calalonia. The quote by Catalonian President Artur Mas2: “If a financial agreement is not reached, the road to freedom for Catalonia is open” illustrate the use of the crisis for reaching its political objectives.
Professor John Loughlin at Britan’s University of Cambridge adds that regional governments’ poor performance undermines the case for regional autonomy and therefore we can now see a strong tendency for the national governments to claim back some of the autonomy that was given to the decentralized entities.
To conclude this chapter we can say that there is a gap between the European Union crisis solving procedures and solutions and the ability of particular countries to implement them. Therefore it is crucial that the regional governments cooperate in the solution process with prediction of the possible internal problems with implementation.
European integration over the last 67 years has faced significant changes and modifications which not only brought peace and stability, but also prosperity and wealth to Europe due to strong economical collaborations, war prevention, a common market, free cross-border trade and a single currency. It also contributed to a better position of Europe in relation to other nations and continents around the World. However, the traditions change and renew from time to time depending on different circumstances and therefore, the European integration is an ongoing process. The environment and conditions change and many actors influence the EU operational process. Looking at the general aims of the EU, such as war prevention, shaping a common market, free cross-border trade and a single currency, they have lead to a unique position of the EU within the political and economic arena.
Due to structural developments of the EU and the current frame-work, it can be concluded that the EU frame-work cannot be categorized to any traditional (legal) structure as it contains both domestic and international law. Some of the legal instruments have binding and others have non-binding effects and are mainly used as harmonization tool. However, looking at the role of some of EU entities, such as the agencies, serious doubts are put on entities functions as they should function autonomous and should not influence decision making process.
There is a high need for more democracy, transparency and openness in general and there are some serious questions that can be asked about the independence, control and accountability about the EU entities. Due to conflicting concepts and lack of definitions, it can be concluded that the European Union suffers from serious accountability deficits and there are serious issues with regard to the delegation of powers, discretion and the lawfulness of decisions taken.
The current crisis has put serious pressure on the EU and the chosen reforms breaches the provisions quite significantly. Emergency alone cannot justify politics deviating from principles and rules that emerged as the legal and jurisprudential core of 67 years integration. The analysis reveals the risk of core issues of EU law nothing less than the integrity of European constitutionalism, and legal values including conservation of wealth and stability.
EU leaders could change the game and create a basis for a return to fiscal and monetary stability with establishment of a fiscal union. However, major political obstacles should be overcome and leadership of all involved parties is absolutely crucial. Furthermore, the issuance of Eurobonds implying ex-ante approvals of national budgets can imply a form of a political union. A decision in this direction might create a stronger EMU and might strengthen markets and the ECB as well.
Rebuilding of trust is essential and it will enable negotiations for a political union among the Member States. Spain’s financial squeeze will escalate and it will need even more help from rest of the Europe. That will intensify the anger towards Spain in the contributing nations, such as Netherlands and Germany, undercutting the efforts European leaders to keep the 17-nations Euro zone intact. To survive, the region needs more unity, a bigger permanent bailout fund, enforceable limits on deficits, and centralized banking regulations. Therefore unity and willingness to make shared sacrifices are strongly recommended and thus more awareness should be created by political leaders.
There is a strong urgency to select ways for implementing the appropriate solutions as quickly as possible. No implementation of solutions will keep the Euro zone in a state of dangerous fragility. Taking into account also the increasing territorial and social tensions, governing European laws and economic set up it can be concluded that European crisis is far from over.
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