Summary of information on democratic control in the reform of economic governance in Europe

Datum publicatie: dinsdag 22 januari 2013 - Datum advies: vrijdag 18 januari 2013

​At the Senate’s request, the Advisory Division of the Council of State has provided information on the embedding of democratic control in the reforms of economic governance in Europe to combat the economic and financial crisis. The request should be viewed against the background of the potentially far-reaching proposals of the President of the European Council, Herman Van Rompuy. These proposals are designed to give fresh impetus to the economic, budgetary and political integration of the European Union. They were presented and discussed in the European Council on 13 and 14 December 2012. The Senate publicly released the report on 22 January 2013

Content

The Advisory Division explains in its report that the crisis has revealed the need for far-reaching measures if it is decided that the Economic and Monetary Union (EMU) should continue to exist. This will involve the far-reaching ‘Europeanisation’ of budgetary policy, structural economic policy and banking supervision. This also means that Europe must have substantial financial buffers for crisis management in respect of countries and banks. As long as the European Union does not have sufficient own resources, these buffers will consist of the public funds of the member states. Decision-making structures must be created that allow effective governance of the EMU. Where institutional structures already exist within the EU they should be used for decision-making. This will, in principle, create an institutional balance, with important roles for the European Parliament, the European Court of Auditors and the Court of Justice of the European Union. The introduction of parallel structures, as occurred in the case of the Fiscal Stability Treaty, is therefore undesirable in the long term.

Involvement of national parliaments

In so far as the EU itself lacks sufficient own funds, the decision-making mechanisms should be designed in such a way as to reflect the need for national parliaments to be adequately involved where national public funds are being used. However, this must be done in such a way as to safeguard the effectiveness of the process of deciding on the use of the funds. Hybrid forms in which both national parliaments and the European Parliament are involved and which do not amount to more than an exchange of information merely make the situation unclear. An example of this is the conference referred to in article 13 of the Fiscal Stability Treaty. A role for national parliaments at European level is therefore worthwhile only if this is accompanied by specific powers within the European decision-making process, in particular in the euro area.

Public support

However parliamentary involvement is organised, this will not automatically generate public support. The introduction of new or changed structures is not the only way of addressing a democratic deficit. It should not be overlooked that in view of the radicalness of what is necessary if the EMU is to function properly the proposals must command sufficient political and public support. This support cannot be taken for granted and must be earned.

Right to approve the budget

For the Dutch parliament the step towards effective governance of the EMU means that the framework for budget compliance will be determined to a large extent at EMU level. If the right to approve and amend the budget is to be exercised with optimum effect, the House of Representatives and the Senate will have to focus their attention on the positions taken by the Netherlands in the various forums. This process is not new in itself, but will now also extend to budgetary policy, structural economic policy and financial supervision policy. In practice, this will mean that the political decisions on the budget for the subsequent year will for the most part be brought forward from the autumn to the spring.

Safeguards

The safeguards needed to maintain procedurally and substantively the rights and powers of the Dutch parliament, in particular the right to approve and amend the budget, are threefold. First, parliament should be able to make arrangements with the government to adjust the timetable of the budgetary process, bringing it into line with the European Semester. Second, the contractual arrangements between the government and the European institutions which may take effect in stage 2 of Van Rompuy’s plans should be approved annually by parliament. This should occur after consultation between parliament and the government about its contribution in the European Commission. Finally, parliament should have the right to approve the provision of loans in the context of the European Stability Mechanism (ESM) and any other crisis mechanisms and to monitor their use.

Democratic safeguards upon the transfer of sovereignty

The democratic safeguards that are necessary when sovereignty is transferred to the European Union will have to be sought initially in the powers of the European Parliament. Democratic involvement should, after all, take place as much as possible at the level at which the decision-making takes place. Where the decisions involve legislation, the European Parliament should have a right of codecision. But where they are in the nature of administrative decisions, there will be accountability to the European Parliament. Ultimately this duty of accountability should be capable of resulting in the resignation of the European Commission or individual Commissioners.

A solution will have to be found here for cases in which either legislation or administrative decisions apply only to the euro area member states. From the perspective of democratic involvement it would be undesirable for members of the European Parliament representing non-euro area member states to decide on such matters. This problem could be solved by adjusting the decision-making rules in the European Parliament, but the establishment of a separate parliament for the euro area is also a possibility. This possibility would institutionalise a departure from the principle of the unity of the European Union and should therefore be considered only if divergence becomes unavoidable in view of the parliamentary powers that must be exercised.

This would have advantages and disadvantages and would in any event necessitate a treaty amendment or a new treaty between the euro area members. For a proper assessment this idea must be given further consideration and fleshed out in more detail.

The full text of the Council of State’s report can be read here.

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