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CHAPTER 2

Welcome to European post-democracy

‘We have created a monster.’

Thomas Piketty

As if we hadn’t known. In fact, it was clear from the beginning. The political monster we have created is a system in which the state and the market have been decoupled – by the Maastricht Treaty of 1992. From that point on, decisions on monetary and economic issues were taken at the European level, whereas those on fiscal and social policy continued to be taken at the national level. There was simply no way that could work. Without a political superstructure, the internal market and the euro were doomed to become a dictatorship. A European economic and monetary system was forced on the nation states like a cork being pushed into a bottle, and this has put social policy almost beyond the reach of government. And because this was all embedded within a grand European peace narrative which reached a historic climax with Maastricht in 1992, with the reunified Germany as its emblem, then anyone who dared to criticise it risked having their motives questioned. Who, in the midst of all this, was going to give any thought to the possible economic dangers inherent in a market without a state and a currency without a democracy?

Essentially, the euro shifted the costs of economic policy from business on to the citizens. In the 1970s, due to the extreme volatility of the dollar, European industry – especially in Germany – suffered from severe exchange rate fluctuations within the European internal market. The value of the German Mark was systematically driven upwards and German business lost competitiveness through higher wage costs. This resulted in the demand for fixed exchange rates, and ultimately for a common currency. Economic and monetary union enabled European business (and more particularly once again German business) to avoid the costs created by the constant currency fluctuations within the European markets. The euro was thus a project driven largely by business, one especially dear to the heart of German exporters and banks. For them, exchange rates and transaction costs within the currency union disappeared. It was a gift. European business was given the euro without having to accept European fiscal and social union in return. This was the decisive mistake at the birth of the euro, one which subsequently couldn’t be undone. Crudely speaking, it gave the banks and (exporting) industry licence to milk the Eurozone without having to take on any responsibility for social equality and cohesion within Europe. From this point on, business enjoyed a free rider position in the European internal market that it was later not prepared to relinquish.

Labour and capital were thus de-coupled, and negotiations between them were taken out of the national context. This inevitably led to social upheaval, as ‘capital’ was able to exploit the European institutional structure whereas ‘labour’ was not: labour relations in Europe are not uniform across countries, and labour is much more poorly organised than ‘capital’. ‘Capital’ was given a level playing field, which was a huge advantage; ‘labour’ thereby suffered a huge disadvantage. Hayek 1, Marx 0.⁹

From contrasting labour relations systems to different rates of corporation tax: Maastricht and the euro created a shoppers’ paradise for business, but for those in paid employment only misery in their respective ‘national containers’.¹⁰ The European states undercut each other in a fiscal race to the bottom. Tax dumping by the states was compounded by wage dumping by companies, because collective bargaining at the European level didn’t exist. Basically, competition inside the single market was shifted from business on to the citizens. Whereas business got the freedom to relocate anywhere it wanted on equal or better terms, European citizens had no defence against divergent social standards or tax rates. What was missing was a transnational democratic framework. Because European citizens did not and do not have equality within Europe. The citizens were effectively handed over to the Single Market by their national governments. The European states abandoned their natural role as protectors of their citizens, while at the same time a properly functioning European parliamentary system that might have prevented the worst consequences did not exist.

The most fundamental breach of democracy in the way the EU is currently structured is the fact that the European citizens do not have equal representation in the European Parliament, even though it is there to represent their common interests. This contravenes the principle of electoral equality. Voting does not follow the same rules from Finland to Portugal. One member of parliament does not represent the same number of citizens from Malta to Germany. This blocks the path towards a true European democracy. Germany's Federal Constitutional Court regards the fact that the European Parliament in its current form does not comply with the principle of ‘one person, one vote’ as one of the most important reasons why the European Parliament cannot be considered democratic in the traditional sense. This is why the so-called ‘Responsibility for Integration Act’ (‘Integrationsverantwortungsgesetz’) was introduced in the German Parliament during the ratification process for the Lisbon Treaty, giving the German Bundestag, as the true guarantor of legitimacy, a legal responsibility to monitor the European Parliament.

This is the general pattern for the EU: what is really important cannot be accomplished; it is not possible to implement political and civic equality, a fundamental prerequisite for any polity – and so the EU ties itself in knots, for decades now, in complicated reforms and opaque measures designed to get around and make up for this failure. It thereby creates ever increasing levels of undemocratic entanglements within the system, which are then painted as necessary pragmatism, or as ‘a necessary response to crisis’, and fobbed off on the citizens. However, it is the supposedly sovereign nation states which are preventing the application of the principle of civic and political equality at the European level. Because originally it is not states but citizens who are sovereign,¹¹ yet they are robbed of their legislative rights twice over in the dense jungle of EU governance.

From a structural perspective, parliamentary oversight in the Europe of the EU currently falls between two stools: the national parliaments no longer possess enough legal authority in this regard, while the European Parliament has not yet acquired it. The EU Commission, which initiates European legislation (whether directives or regulations) – usually driven by national governments and their interests – steps into this vacuum. Paradoxically, the national governments then get to vote on the new laws themselves in the European Council. Dieter Grimm,¹² a former member of Germany’s Federal Constitutional Court, sets out very clearly how a system has thus evolved in the EU wherein the Executive and the Judiciary have been allowed for decades to operate without proper parliamentary checks. To put it another way: the EU does not comply with Montesquieu’s doctrine of the separation of powers. The Europe of the EU has thus been politically emasculated, and has mutated into an executive and judicial entity in which one thing above all is missing: a place where credible decisions are reached by a political process for which common responsibility can be taken at the European level. Caught inside this strange hybrid between a union of states and a citizens’ union, both national and European democracy are being ground down. The EU is eating its way into the national parliamentary systems. Around 70 percent of all laws are adopted from European legislation – regulations and directives – which for the most part is simply nodded through in the EU committee system. Its fundamental legitimacy is open to question, indeed downright problematic: it is legal but not democratic.