Technocracy versus Democracy

by Daniela Schwarzer

The fact that the crises hit the euro area so hard revealed fundamental flaws in the architecture of the currency union. The absence of joint fiscal and economic policies or transnational budgetary stabilisation mechanisms are two of them. In response to the crisis, the EU decided to reinforce rule-based, technocratic coordination both for national fiscal and economic policies. Rules are to be applied with less political leeway, and the possibility to sanction Member States has been extended to the preventive arm of the Stability and Growth Pact. The idea to introduce more European considerations into the formulation of national policies has lead to the introduction of the so-called ‘European semester’, an attempt to streamline the coordination processes.

From a democratic perspective, at least three problems emerge. A first is related to the rules-based approach as such. If respected, it considerably limits democratic policy choices in the member states. If there is a conflict between national preferences and the rather inflexible rules whose implementation is equipped with little democratic legitimacy, there are two possibilities: a) the government ignores the rules which may eventually undermine the credibility of the EU’s legal and regulatory framework; b) the government changes policies due to European pressure but these limits imposed on a liberal democracy by unelected bodies outside the purview of public accountability will increase problems of legitimacy.

A second problem is related to the process of policy coordination. Conflicts have arisen with national parliaments which criticise that their rights and responsibilities are seriously limited, for instance if a national programme is sent into the European scrutiny process by the executive, before the national parliament has even seen it. Moreover, the crisis is leading governments to attempt a recentralisation of powers domestically in order to control regional spending.

Thirdly, the EU as a more regulatory state has traditionally relied more on output than input legitimacy. But in the current crisis, the EU fails to deliver output. It is rather seen as the problem (both by debtor and creditor countries) for low growth rates, restrictions on public spending and high unemployment, rather than as a solution. This is not just a temporary problem of two, three crisis years. Given the structural weaknesses of the euro area governance set-up, there are strong arguments for a substantially deeper integration which would allow the euro area members to take legitimate and efficient policy decisions.

The problem of technocratic intervention is particularly important for member states that had to apply for a rescue programme of the Troika (European Commission, European Central Bank, International Monetary Fund). In these countries, the population’s say over economic decisions has been rendered largely null. The Greek situation has been judged as ‘no longer compatible with democracy’ (Wolfgang Munchau, Greece will have to default if it wants democracy, FT, February 20, 2012).

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.