Challenges for European regions: social-economic problems and the need for more Europe-wide democracy

Celebrating the 20th anniversary of Randstad Regio last week in Brussels, the question arose what the future is for European regions. The economic crisis seems to strengthen the tendency towards centralization both in the European Union (for example, fiscal policy making) as well as in its member states. Still, regions as well as municipalities could play an important role in the Union that is troubled by limited legitimacy. Many citizens do not regard the Union as the government that is providing public services to them.

The economic crisis has led, as an emergency measure, to closer European cooperation on fiscal policy making. With the coming into force of the Fiscal Compact, the member states have designed a complex arrangement of fiscal norms as well as monitoring devices to control national government spending. What is fascinating about this development is that the increase of European fiscal power will reinforce a call for a European view on social-economic policy. Fiscal and social-economic policy making often go hand-in-hand and cannot be easily disconnected. National budgets were often used to combat economic stagnation and to stimulate economic growth and employment. Moreover, these problems have a strong spatial component, because economic problems are not the same in all parts of the EU (or a country if you wish), while solutions to these problems often have a strong regional component. Here lies a first challenge to European regions in the coming years. How can they support and contribute to social and economic development, together with others? And how can regions participate in the further development of these policies both at the national and the European level? In my view, their input will be essential for the success of these policies.

The second and but connected issue relates to the role of citizens in Europe—since 2013 is the year of the European Citizen, it warrants further attention. In his speech on the future of Europe David Cameron mentions one point I agree with and that is that citizens still have a problem identifying Europe as a government for them. I disagree with Cameron that a possible British exit would be the right answer to this problem, but that is a different issue. It seems that so far we have not given a good answer to this problem. In a reply to Cameron, the president of the European Parliament, Martin Schultz, proposes to have more transparency and ‘open’ debates in Europe. I am not convinced that this is the way to go.

Our national governments, including regions, are struggling with the increased mobility of goods, persons and services, while citizens also would like to see their local and national choices being respected. In trying to be as efficient and effective as possible, the Union seems to have taken on more and more tasks over time. Many problems nowadays have cross border effects suggesting that solutions need to be developed at the European level. But is that really necessary? Not all problems with cross border effects need to be resolved by Brussels. Not all problems put on the European agenda need to lead to Europe-wide legislation. Subsidiary needs to be taken seriously, also when it concerns the distribution of tasks between national and sub national governments. Unfortunately, for many the consequences of greater mobility are not yet clear. Moreover, often this discussion is dominated by nationalism and populist rhetoric. Still, what is needed is a discussion about the role of various levels of governments in Europe, including regions. If we want to be democratic, we may have to live with some policy inefficiency. When regional governments can no longer adapt their policy to the demands of their citizens, our democracies will be in danger. That is a second challenge for all of us, also for regions!

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Friday links on Europe

A speech by Polish Foreign Minister Sikorski in Blenheim:

See here, with a link to the speech in pdf and here for the very insightful commentary and analysis in Economist’s Eastern Approaches. As usual, I am impressed. With the fact that despite being a diplomat he is actually saying something, that he is saying it at a time and place where his message may not have been that welcome and, last but not least, with the delightful irony of a  Polish politician with ‘a background of hawkish British Atlanticism’ quoting what he has learned from Marx in Oxford about false consciousness…

Also, reflections on Mario Monti’s talk in Florence, at the European University Institute: a nuanced report in Aidan Regan’s blog.

And finally, Neelie Kroes’ visit to Sofia and discussions on media freedom. Something of an anti-climax.

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Datapoints of the day

Three-quarters of the British think that the EU budget is larger than the UK’s*.

42% believe that there is an EU tax.

23% think that the EU has a standing army.

here is the source

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*N.B. EU budget in 2011 ~ € 140 billion; UK budget in 2011 ~ € 850 billion. There is no EU tax and there is no EU standing army.

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enlargement, deadlock, democracy

A lot of the media attention for the European Council meeting of last week has been so far focused on the rift between the UK and the other member states. Apart from a fleeting announcement that Hungary agreed with the UK stance (quickly withdrawn and more indicative of the confusion arising from the populist rhetoric beloved of the Orban administration), Britain’s isolation seems to draw more commentary than the decisions of the summit. It is worth noting that Britain has always, since the time it joined the European Community, been an outlier in terms of its preferences on European integration. As we know from veto player theory, the number of veto players matters, but so do their preferences. If the new member states preferences cluster closer to the older member states preferences, the increased numbers post enlargement need not cause deadlock. And vise versa, with unanimity, as in treaty change, one veto player with different preferences is enough to cause deadlock. No wonder the other member states favoured the 26+1 option.

Thus, often recently I have the occasion to observe that division or deadlock are not the result of the last enlargement of the EU and that the member states that joined in 2004-2007 have had much less difficulty adjusting their preferences and interests to the prevailing consensus or sometimes, like Poland, actively seeking to facilitate one. In several of the new member states (see here for the Slovak stance for example), the memory of hyperinflation is much more recent than in Germany and commitment to monetary discipline is hard-won and not only inspired by external guidance.

One cannot help but wonder at the unshakeable assumptions underlying the statements of those who continue to insist that it was the last enlargement that made the EU ‘ungovernable’. Recent events show that just the three largest member states are capable of achieving this all by themselves.

In other news we find a worrying reminder how fast the EU is losing what Milada Vachudova, in her book, Europe Undivided, aptly termed ‘passive leverage’ with neighbours and candidates. The comments by just retired Turkish ambassador to the EU Selim Kuneralp, that the EU should give up its commitment to democracy and start printing money, remind me that it was doubts about Turkey’s commitment to democracy that slowed down the start of its accession negotiations. Hopefully, the usual enlargement method will still work in this case, namely that the EU helps the candidate reaffirm its commitment to democracy, rather than the candidate helps the EU weaken its own. Then again, Mr Kuneralp was pointing to the existing tensions between a common monetary policy and sovereignty and democracy that have been highlighted  in the Dani Rodrik lecture which we discussed in this blog and, in the EU context, by Frits Scharpf in his LSE lecture on the crisis and democracy..

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The discrete charm of EU referendums

The recent commotion about the possibility of a British referendum on EU membership raised an important question: When are referendums a good idea?

At first it might be hard to see any argument at all against a referendum. After all,  in a democracy the public should be allowed  to decide the course of policy, especially when really important issues, like European  integration, are at stake.  Surely, whoever is against a referendum is just scared from the outcome.

It is a  bit more complicated, however.

First, in a referendum your choice is limited to a small number of alternatives (usually two – ‘yea’ / ‘nay’ ). Formulating and narrowing down the alternatives can be more important than  the selection between them, and it is  a process in which the public has no say.

Second,  the method of selection matters. The proposed British EU referendum had three options (stay, leave, re-negotiate). But this is prone to a voting cycle. It could very well be that there is a majority that prefers  leaving to staying, a  majority that prefers staying to re-negotiation, and a majority that prefers re-negotiation to leaving at the same time and amongst the same group of people. How do we choose then? We could use  plurality rule (whichever alternative from the three  has the most votes wins) to decide, but why plurality is any better than pairwise majority voting? Obviously, the power of the one who determines the options and the selection method looms even larger. Why not include a fourth alternative? Going down that road, why not offer people a list of policy areas for which they can express a desire to ‘Europeanize’ or keep at the national level? In fact, why not let people fill-in which issues they want to delegate to the EU and  which ones to reserve for the state?

The third, and most important problem is the meaningfulness of the alternatives being offered. Let us first consider the option of re-negotiation of the British relationship with the EU. How realistic is this option (and what does it imply) given that the outcome of negotiations necessarily depends on both sides? I would certainly choose, if offered the chance, to re-negotiate my mortgage rather than  keep paying high interest or defaulting, but how likely is that my bank would agree to the proposal? Why do the British Conservatives assume (and offer the option to the people) that the EU will agree to their terms of engagement? The EU might very well refuse the UK (or any other country) to unilaterally pick and choose from the integration menu because of the spillovers and externalities of economic integration. For example, if I allow you to sell all your goods  and services in my country, I can demand some  minimum standards on, say, protection of the environment and/or work safety in your country to avoid social and environmental dumping. Integration a la carte is envisaged to some extent in the Treaties (enhanced  co-operation and opt-outs) but is clearly, and for good reasons, subject to limitations (and the consent of the other Member States). Sure, having the constraint of a national referendum at home gives you a powerful negotiation advantage to secure better terms for yourself, but at the risk of compromising the entire bargain resulting in worse outcomes for all sides. Britain’s threat of leaving the Union unless re-negotiating its relationship  is a bluff that might very well be called by the EU.  (I assume Britain would still want access to the single European market but the opposite would surely be an economic suicide).

What about the option of leaving the EU  altogether? After all, Norway and Switzerland all seem to be thriving without being part of the EU. Again, I still assume that the UK would want access  to the internal market even if it leaves the EU. Access to the market without being an EU member, however, comes at a price.  First, there are  regular financial contributions to EU programs (for example Switzerland was required  to pay about €645 million for projects in the new member states and Norway pays more than 150 million each year).  But the bigger price  comes from having to implement EU rules  without having influence over their preparation. Norway and  Switzerland still have to apply the vast majority  of EU  legislation (all Internal Market-related  rules) and policies even  though they do not have a say in their making.  Britain, and Cameron in particular, already felt how painful this can be when told to keep their opinions on the euro-crisis to themselves. I don’t think that the British public fully realized the implications of leaving the EU without leaving the single market.

Referendums only make sense if the options being offered have consequences which are reasonably clear and, above all, realistic. This is definitely not the case with the recent proposal of the British Conservatives. At the same time, one cannot and should not ignore the growing negative public sentiment towards the EU in the UK (and beyond). The EU needs to be politicized beyond the false dichotomies of membership/ no membership. The opinions of British (and Dutch, and Slovakian, and Maltese) citizens should be heard and taken into account when making European policies. And their preferences should be respected  in refraining from making common European policies as  well. But all this needs to be accommodated  through the regular channels of political contestation and representation rather than incidental and manipulable forums of direct demockracy.

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Britain and the European Union

The Guardian reports:

“David Cameron is bracing himself for the biggest rebellion since he took office, with possible frontbench resignations, when Tory MPs defy No 10 to vote in favour of a referendum on Britain’s EU membership on Monday.”

Cameron says he agrees with the idea of a referendum in principle but cannot support it because of the coalition and the Liberal Democrats. We all feel his pain… If only those Liberals weren’t in the way, he would go to Brussels this very minute, bang on the table, withdraw Britain’s EU membership, get her money back, close borders to French and German goods, impose duties on the import of Dutch Gouda and Spanish chorizo, stop British students from going to Barcelona for those bohemian Erasmus exchanges, bring his policemen back from EUROPOL in the Hague, leave the single European sky, send back all those Polish plumbers, and re-introduce restrictions on cross-border financial transfers. If only…

I find Britain’s position on European integration rather hypocritical. I am pretty sure that even the Tories would prefer a world in which the EU exists to a world in which it doesn’t. But what they would like best is a world in which the EU exists but the UK is free-riding on the single market and the common policies. Take the benefits from free trade and let someone else pay for the externalities.

 

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