Crisis Management and Integration at Gun Point

by Daniela Schwarzer

The ways decision-making that has taken place both in crisis management and in governance reform has increased the perception of democratic deficits in the EU. At peaks of the crisis, key decisions were taken at emergency summits, discarding the European Parliament, providing a key role to Germany and France at the costs of the medium-sized and smaller member states, while national parliaments were only able to give their consent after the fact – at such a high price for dissent that this politically hardly became an option. These crisis management decisions were characterised by a lack of transparency and accountability and a lack of political leadership and public communication which could have played an important role in preventing adverse reactions among national publics. Meanwhile, because of a lack of a perceived self-interest in a more substantial approach to crisis resolution, some necessary financial steps to resolve the crisis could not be taken because of the clash between what creditor and debtor countries needed to do to retain domestic support and democratic legitimacy (Simon Tilford, Has the eurozone reach the limits of the politically possible?, CER comment, 12 July 2007).

The consequences of the crisis and of the design of crisis management instruments seem to have created a vicious circle of declining legitimacy. Citizens in states that received bail outs seem to feel little gratitude for the support but rather saw rescue packages as designed to help save a European cabal of political and banking elites in league with each other. Meanwhile, public opinion in the donor countries is likewise critical of the financial help they have to pay for. As soon as real losses become apparent, this sentiment will increase. The crisis meanwhile remains unresolved. This is partly because a lack of legitimacy in EU decisions prevents ‘more Europe’ which could eventually solve crisis. Governments are squeezed between what markets want and what populations will accept. This is one of the reasons why they resort to the ECB as the main crisis manager. It expanded its potential role with the announcement of the OMT-programme in September 2012 which can eventually involve unlimited bond purchases from troubled member states, in exchange for conditionality which governments and the European Commission and IMF will have to police. However, the ECB’s blunt step may eventually entail financial losses which end up with the ECB’s shareholders – the euro area member states and their tax payers.

All three developments (the lack of policy choices, the technocratic approach in policy-coordination and the lack of democratic legitimacy of crisis management which de facto deepens integration) all pose serious challenges to national democracies and the legitimacy of the overall integration project. The time is ripe to engage in a serious debate how monetary and increasing fiscal and economic integration can be matched by legitimate, democratic decision making in and for the euro area.

Dr Daniela Schwarzer is Senior Associate at the Research Division European Integration at the German Institute for International and Security Affairs, Stiftung Wissenschaft und Politik (SWP) in Berlin. From September 2012 till August 2013 she is Fritz Thyssen Fellow at the Weatherhead Centre of the University of Harvard.