The “grand bargain” and the principles of European decision-making

What’s at stake

The March 11^th Heads of State EU Summit brought a few important changes to the crisis resolution mechanism and to economic policy coordination that we will discuss in greater details once the conclusions of the follow-up 24/25 March Summit are published. In the meantime, perhaps the most important consequence of the March 11^th agreement lies with the discrete but firm side-lining of the European Commission and the establishment of a two-speed governance system.

An institutional coup

Andrew Watt argues that for two member states to simply short-circuit the normal EU procedures and arrange a grand bargain that is then presented, as a fait accompli to other heads of government was really extraordinary.

Garret Fitzerald argues that the French-German idea of employing an intergovernmental reform process, outside the EU’s normal decision-making structure has received almost no publicity despite its potential impact. The normal decision-making system (known as the “community method”) is one that precludes member states, regardless of their size and importance, from pushing their own interests by proposing new EU laws. Only the independent commission may propose such laws, which, subject to agreed amendments, are then adopted by the Council of Ministers, nowadays jointly with the European Parliament. There is a new danger that the decision-making system that for over half a century has sustained and kept in balance an inherently cumbersome union, incorporating some very large and also many small states may lose its hitherto carefully preserved cohesion, and for the first time become dominated by some larger states.

Jacques Delors, Romano Prodi and Guy Verhofstadt argue that the Franco-German proposal for a competitiveness pact received short shrift as much for the indelicate manner of its presentation as for its content. Finding a formula that works for all is no easy matter. But that task should be the preserve of the European Commission, not a cabal of two or three countries imposing a model on the rest. The authors also criticise the fact that the Franco-German proposal is based on an intergovernmental model of peer pressure that has proved repeatedly ineffective because it lacks discipline and impartial adjudication which the Commission was designed to achieve more than 60 years ago.

Nothing about you without you

March 11^th saw the first ever two-tier summit, a richly symbolic event at which the 27 leaders met in the morning, lunched together and then divided. The Economist argues that historians may come to see this as the moment when the EU split into a dominant, corporatist euro area and a smaller, more liberal outer zone. The fear that the single currency could divide Europe has a long history, going back at least to the 1992 Maastricht treaty but, in previous instances, Germany had played a crucial role in keeping Europe together. Bagehot argues that the next few months and years will reveal what this means for the 10 EU member countries that are not inside the euro zone: many of their governments, from Scandinavia to eastern and central Europe, are plotting furiously to gain some form of access to the summits of euro-zone leaders that are fast becoming a habit in EU-land.
Charlemagne argues that March 11^th created important divisions between EU members and Eurozone members. In its original draft, the Franco-German proposal set out six objectives to be achieved within a year. All this was to be supervised by national governments, not the European Commission, the EU’s civil service. There would be yearly summits at 17 or 17-plus – the euro zone plus any others that choose to join. After denunciation from all sides, the latest version now renamed the “pact for the euro” places the commission at its heart and removes the overlap with existing plans for closer scrutiny of members’ economic and budgetary policies. And it appoints the commission to supervise new commitments that are national prerogatives.

Place du Luxembourg reports that many speakers at a Policy Network conference feared that the emerging two-speed Europe would create problems in the governance of the single Market, as some of the new economic rules were single market rules that would only apply to the Eurozone countries. Mario Monti identified those items, which concern the single market: The mutual recognition of professional qualifications, the reduction of the retirement age and the end of wages indexation to inflation. From here he then went on to argue that for all the debate about the quality of these and the other proposals, the problem was that they did not represent a credible commitment.

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