The European refugee crisis and EU governance

We have all been greatly affected by the unfolding European refugee crisis and the EU’s failure to offer a coherent response. Another EU default, in the same summer as the Greek debt crisis. Most observers will agree that both crises are not just of the EU’s own making, but that does not erase the fact that the policy responses appear wholly inadequate.

In my previous blog I critiqued the rules-based approach of EMU and Eurozone governance. Not that it is bad to have good rules, but for a well-functioning economic and monetary union a mere set of rules on national budgetary discipline is insufficient. Some kind of fiscal transfer mechanism is required. Today I read that a French member of government, Mr Macron, is of the same view.

It is remarkable that a similar analysis can be made of the refugee crisis, as pointed out in Wolfgang Munchau’s excellent FT opinion piece (with apologies to those who do not get behind the FT wall). No need to copy or summarise here, but do read it if you can.

The refugee crisis is a sobering lesson for us, EU lawyers. There is a nice apparatus of EU legislation, harmonising national laws on asylum and the treatment of asylum seekers. There are clear rules in the Dublin Regulation on which country is responsible for dealing with a particular asylum claim. There is the EU Charter of Fundamental Rights which is supposed to protect everyone. There are mechanisms of judicial review, with the possibility for any judge in any EU country to refer questions to the EU Court of Justice – if need be under an accelerated procedure.

Has any of this worked this summer? Not at all. The Dublin rule is proving untenable, but equally hard to modify. Asylum claims ought to be judged by each country under identical rules: the Geneva Convention and EU legislation. But we read and see that there are huge discrepancies in the acceptance of such claims. Germany and Sweden are the most receptive countries, and the Hungarian prime minister considers that refugees are a German problem – implying that they are wholly unwelcome in his country. So far for the rule of law in the EU.

Consider also the following example of how the law can be part of a virtual world which is totally detached from the real one. One of the core principles governing the Schengen free movement zone – which the EU calls the Area of Freedom Security and Justice … – is the principle of mutual trust. It means that, in matters such as asylum, all EU countries are full protectors of human rights, and that their relations should be governed by this principle. They cannot check, when returning an asylum claimant to another EU member State, whether that claimant’s rights will be respected. The EU Court of Justice even went so far, less than a year ago, to declare that this principle needs to be protected from interference by the European Court of Human Rights, which fortunately is a bit less presumptive about standards of human rights protection across Europe.

Mutual trust, this summer? All EU countries offering refugees treatment which respects their human rights? Just think of all the images we are seeing.

So what to do about all this? It is easy to adopt the regressive position of abandoning Schengen, and reinstating border controls. Only, if you think this through, it is no solution at all (again pretty similar to the Eurozone crisis). Even if one discounts the negative effects for everyone else moving freely around a borderless Europe (which does not include the present London-Brussels-London mover of course): the fact is that even more refugees would get stuck in Italy, Greece, and Hungary, which are the most affected borderline states. That would be even less sustainable than the present situation, in a crisis such as the one currently engulfing Europe. Imagine the multiplication of the scenes at Calais, at so many internal EU border crossings.

The crisis proposals which are currently on the table are focused on refugee redistribution – greater EU solidarity, in other words, than under the current Dublin Regulation. Not easy to achieve, in light of the politically toxic nature of immigration in so many countries. But it also dances around the problem of who decides about refugee status. To me, at this point, it seems that this is a policy area which calls for institutional federalism. The EU has so many agencies already. Why not create an EU asylum agency, with offices in most if not all member States, which decides on EU asylum claims. An institutional response, rather than a rules-based one. Federal law, administered by a federal agency. The advantage would not only be that there would be unified decision-making, but also that this agency, if operating under a well-designed status of independence, could de-politicise the treatment of asylum claims. Just like EU competition policy is de-politicised. Perhaps food for further reflection.

Austerity, rules, and fiscal policy

Much of the commentary on the Greek crisis has focused on “austerity”, which has established itself as the central concept in most analyses. There is a very strong current in at least the English-language economics commentary to indict the excessive austerity demanded bausterityy the eurozone (and the IMF!) for the collapse in Greek GDP, and the consequent unsustainable nature of Greek public debt. Proponents of this view include Nobel prize stars Joseph Stiglitz, Amartya Sen and Paul Krugman. The Keynesian theory is simple enough, even for this dilettante in the field, a mere lawyer, not an economist: in times of crisis, when the private sector saves rather than spends in order to repay excessive debt and to recover, governments need to spend more. If in such times the government also spends less, the crisis only intensifies and government revenue decreases with further negative effects on public debt. By contrast, when growth resumes as a result of expansionary policies, government debt can be more easily repaid, and will to some degree take care of itself through inflation and greater revenue. Who are we to disagree? But those are not the policies which the eurozone has embraced.

And yet, as a lawyer, I’d like to examine the evidence, forensically, and would love to cross-examine the witnesses. Not about whether the theory is correct – that looks incontestable. But about the realities of the eurozone sovereign debt crisis. Why is it, for example, that essentially the same bailout policy did not destroy the Irish and Portuguese economies? Why is it that UK austerity policies, which are also pretty tough, have apparently not undermined the UK economy, which has been recovering more quickly than the eurozone, and has enviably high employment (and unenviably low real wages …)? Why is it that the Spanish economy seems to be on the mend again, notwithstanding strict austerity policies? As long as I don’t get convincing answers to those questions, I continue to think that there is more at hand in the Greek crisis than misconceived austerity.

The political actor most vilified for this austerity drive is doubtless Mr Schäuble (also a lawyer …). He definitely looks most austere, and is seen as embodying Germany’s wrong-headed (some say self-serving) insistence on eurozone austerity. But those who look a bit more closely at Mr Schäuble’s policies see more than a failure to understand Keynesian economics. One recent comment which struck me is that he now considers that a Greek debt haircut – which would clearly hurt Germany as the main creditor – can be talked about if Greece leaves the eurozone, but not if there is no Grexit. He in fact claims that eurozone law prohibits this, a claim convincingly rebutted by inter alia Armin von Bogdandy. But leaving the legal argument to one side, this focus on eurozone rules is revealing. The euro was set up without a fiscal union which would allow for transfers from richer to poorer eurozone countries, without a common economic policy, and without a common budgetary authority. All of that was a bridge too far, at Maastricht, in terms of transfer of sovereignty – or several bridges probably. The deal was that each eurozone country would remain fully responsible for its budgetary policies and equilibrium, hence the no-bailout clause of Art 125 TFEU. Instead of moving to a real political union, as it is mostly called, the negotiators decided to establish strict disciplines for participating states, the famous Maastricht criteria. Rules instead of a common fiscal and economic policy. This focus on national responsibility and strict rules is a central pillar of EMU. So it is not at all surprising that someone like Mr Schäuble, who regards himself as an architect of EMU, insists on Greece living by the rules. In fact, the complete failure of the 6 months of negotiations between Syriza and the eurozone seems to me to have been mostly caused by the unbridgeable positions of a rule-based eurozone approach and a new Greek government regarding itself as wholly sovereign because democratically mandated.

The financial and sovereign debt crises have not as yet led to anything resembling a fiscal union which would allow for EU redistributive policies. Indeed, the term fiscal union as it is currently used in some of the political discourse strikes me as either completely utopian or pretty deceptive. In the many decades of European integration it has so far not been possible to develop any common fiscal policies, other than in the fields of customs duties (a function of EU trade policy) and the system of VAT, but not the rates and most of the revenue from it. To the extent that the EU has competences in the field, it is held back by unanimous decision-making. So a real fiscal union is an utopia, or else a deceptive term which is used to denote just doing a little more at EU level than before.

Instead of moving in that direction, the EU has responded to the crises by ratcheting up the rules. Stability and Growth Pact, Fiscal Compact, Six-Pack and Two-Pack, you name it, it is all more of the same: stricter rules for national budgetary policies, more strictly enforced. From this perspective, it is understandable that Mr Schäuble insists that Greece cannot default within the eurozone: not only has it disobeyed the rules, it has then needed several bail-outs, and if its debt is now partially cancelled the eurozone might just as well throw its rule book away.

But the process of ratcheting up the rules strikes me as pretty desperate. When a major crisis such as the 2008 one strikes, no rule book enforcement is going to resolve it. Spain is the best example. Its sovereign debt was within the Maastricht norms, but when its banking and private sectors crashed its debt ballooned.

To sum up, the eurozone austerity fixation seems to me as much a function of the imperfect monetary union which was created, as it is the result of misguided economic policy-making. It makes little sense further to strengthen the rule-oriented approach (yes, and it is a lawyer stating this). Instead there needs to be some kind of real fiscal policy at eurozone level which allows for some degree of redistribution. Otherwise the euro project will lose all legitimacy, particularly in the countries which are suffering more. Scope for some more thinking and blogging.

The Greek crisis and the dysfunctional European political space

Igreek-crisis-16t has been sad to see the Greek crisis gathering pace, culminating in a Eurozone summit which, on condition of deep and intrusive reforms, allows Greece to remain in the Eurozone, and offers the perspective of another bailout.  But no one is under any illusions that the crisis is resolved.  It is clear that European integration has reached a very low point, judging by the acrimonious debates at all levels: official, media, and social media.

This post does not comment on substance but on process.  If there is a silver lining to the crisis it is, in my view, the birth of a European political space.  The long-living mantra that the EU suffers from a democratic deficit is well known.  It is coupled with a profound scepsis about the potential for ever narrowing, let alone removing, that deficit: there is no European demos, only demoi.  Democracy continues to be embedded in the nation-State, a conception most extensively articulated by the Bundesverfassungsgericht (German Constitutional Court) in its Maastricht and Lisbon judgments.  To put it in less elevated terms: all politics are local.  The EU’s main top-down attempt at instituting democracy at the EU level is tentative and has not worked well: the directly elected European Parliament is not a full sovereign parliament and its elections do not manage to transcend the local nature of State politics.  The democracy sceptics consider that all this is evidence that there can be no real EU-wide political space. Notwithstanding decades of – one would almost forget – largely successful European integration, we all continue to live in countries which are too diverse to enable us all to engage in genuine European political debate.  There is no European political space.

Or is there?  For anyone who has followed the Greek crisis (and has not nearly everyone, to some degree?) it is difficult to deny that we have seen and are seeing a genuine European debate.  It is a moral debate, about who is right and who is wrong; it is an economic debate, about the merits and flaws of the euro-project and of austerity policies; it is a social debate, about protection of people and solidarity; and it is a hard-core politics debate, on left and right, and on power structures.  That is not to say that there is no national dimension to the debate.  Views are clearly very different between creditor States and bail-out States, or, to simplify, between North and South.  Indeed, the debate is way too nationalist in many ways. But a European debate it nonetheless is.

How come?  The most immediate answer could be that the Greek crisis is so deep, grave and awful that people take an – perhaps unusual – interest in European politics.  If that is the case, this European debate is unlikely to continue beyond this crisis.  The European political space would be contingent and not enduring. But there may be a deeper reason.  It is becoming ever clearer that the Eurozone sovereign debt crisis has given birth to a European politics of redistribution. That is a historical shift.  European integration and its politics have never been about redistribution at the levels we now witness.  Yes, the internal market project may have some redistributive effects.  Yes, the EU has tried to develop something of a social policy, but it is limited and contested.  Yes, the expansion of the EU has some redistributive goals and effects.  But none of this is in the same league as the issues raised by the Greek crisis.  And when I say “issues raised” I do not refer to any objective academic assessment of the actual effects of bailouts and their financing, but to political perceptions and claims.  Responsible Germans financing spend-thrift Greeks.  Creditors bailing out German and French banks rather than the Greek people.  The euro project being to the benefit of the North (or Germany) at the expense of the South.  Right-wing eurozone politicians imposing austerity to the benefit of capital.  Etc etc.  And of course it cannot be denied that the Greek people are intensely suffering, that Germany and others are doing well, that we are speaking about a lot of money (even if Greece accounts for only 2% of the eurozone economy), that a default would constitute a transfer from the creditors to Greece, and that full repayment of the Greek debt requires further austerity, if either is at all possible.  All this is inherent in the euro project in times of crisis.  The idea, endorsed by the creators of EMU, that solidarity could be avoided by continuing to have each eurozone State responsible for its own fate has proven illusory.  The euro has created a politics of redistribution, and the crisis a European political space.

However, it is a political space which in institutional terms is dysfunctional.  For the politics of redistribution to work one needs a political system which crystallises debates, and enables, at some point, effective majority decision-making.  By majority I do not mean, in the eurozone context, a majority of Member States.  There is such a majority: the creditors are united in the conditions they impose – in fact Greece has accepted and its parliament has adopted legislation, so there is a consensus.  But it is not a consensus emanating from the European political debate.  It is a creditors’ consensus, and it is mostly determined by national political interests and debates.  For example, the governments of other Southern eurozone countries are resisting a good deal for Syriza, because of the political ammunition it would supply to anti-austerity parties, mostly on the left.  It is also a politically weak consensus, in the sense that it builds on established policies, institutions, and rules.  Once the EU has set on a political course, it is very hard to change it.  In part, that explains the failure of the negotiations since Syriza came to power: how many times have we heard that the new government had to stick to the rules and to what was previously agreed?

By contrast, it is no accident that at one level the eurozone has been able to evolve and respond: ECB policy.  This is an organisation which is capable of crystallising debates and making decisions.  It has a President who is able to say that the ECB will defend the euro, whatever it takes, as Draghi did in 2012 when announcing the OMT policy.  But of course the politics cannot be left to the ECB, because it is independent, hardly accountable, and not subject to the politics of democracy.

The analysis of the dysfunctionality of Europe’s political space is easy enough; which reforms to suggest is much harder.  The “federalists” of course have a straightforward solution.  We need to establish EU-wide political institutions with real decision-making powers, also in terms of redistributive politics.  To simplify: the Commission needs to become a European government, with a majority in the EP, and with a budget which allows for redistribution.  But it is pretty clear that the peoples of Europe (these are the “peoples”, plural, referred to in the EU Treaties’ preamble) are at this stage pretty reluctant to endorse such a federalisation – not sure they are aspiring to “ever closer union”!  Nor am I convinced that this is what European integration was originally aimed at: transcending nationalism is not the same as building a European nation.  So I think Europe again has to find what Weiler has called its Sonderweg to create a more functional European political space.

The referendum paradox

The UK’s EU referendum is upon us, and the media are manic about it.  The timing is uncertain, the EU reform programme advocated by the government imprecise, the reaction by the other governments diverse, and the position of the government and the conservative party towards Brexit in flux.  One constant theme is whether the founding treaties will need to be revised.  However, there is in this respect an enormous referendum paradox, which is hardly ever noted.

Cameron’s position is that the EU needs to be reformed.  If such reform happens, he will advocate continued membership.  In this respect he has been enormously successful.  In the UK there is near universal recognition that reform is indeed needed.  Given that the EU founding treaties are so prolific and detailed, on questions of principle, policy and governance, fundamental reform is difficult to conceive of in the absence of changes to these treaties.

It is here that the referendum paradox kicks in.  It is precisely because serious treaty revisions require referenda in many EU member states that most governments are opposed to reopening this pandora’s box.  This generalised referendum practice – in some countries constitutionally required, in others politically indispensable – is a result of the failed EU constitution-making process (2003-5).  Blair also promised a referendum on the EU constitution, but was saved by the negative votes in France and the Netherlands.  Avoiding referenda in all EU states but Ireland for the approval of the subsequent Lisbon Treaty (2007-9) was a veritable tour de force, which strongly contributed to conservative party clamouring for a referendum – at the time in opposition of course.  This tour de force cannot easily be repeated.

So the paradox is to require EU reform, which really demands treaty amendments, followed by a UK referendum – whereas other governments are dead against having to organise their own EU referenda. To make the paradox much sharper Cameron has tied himself to the 2017 deadline.  It is simply impossible for the treaties to be revised (a process subject to a fairly complex procedure in various phases), and for other, non-UK referenda to take place by the end of 2017.  So let us assume that the treaties are indeed revised, and that this leads not just to a UK referendum, but also to referenda in other member states.  The UK public will then have to cast their vote on EU reform which may very well still falter at the next referendum hurdle – in Ireland, or in Spain, or, who knows, in Greece …

The conclusion can only be that it is a particular political performance to have linked these three elements: a referendum on membership, the issue of EU reform, and a 2017 deadline.

A cross-channel Europe blog

It’s taken 17 years of Eurostar travel Brussels-London-Brussels-London-Brussels-… for me to start blogging about the European Union.  It’s taken a Conservative Party win at the latest general election, and with it the certainty of a UK referendum on EU membership.  It’s taken half a life of study and observation of the EU phenomenon, in particular its legal system.  But here we go.  Time to speak up a bit more.