Earlier this week, Debating Europe attended a panel discussion at the Italian Cultural Institute in Brussels involving Professor Andrew Moravcsik of Princeton University. Professor Moravcsik is one of the foremost scholars of European Integration in the world, and we had the opportunity to put a question or two to him during the event.
During his opening remarks, Moravcsik set out his take on what had caused the current crisis. In essence, his argument was: “be careful what you wish for, because you might just get it.” The expanded version, beginning with the underlying reasons behind the foundation of the single currency, was as follows:
You had a set of weak currency countries that had been devaluing for some time [whose] major goal was to reduce domestic interest rates. You had one big country in the core (Germany), and some of its neighbours, that didn’t like the fact that monetary turmoil in Europe tended to drive its currency value up… Both groups got what they wanted out of the euro at the same time. Interest rates did go down in the periphery, and Germany did end up with an undervalued real exchange rate and a large trade surplus. The problem is: that’s not a stable equilibrium…
If one wants to resolve the crisis, one needs to get rid of the fundamental disequilibria that were induced or calcified by the euro in the first place… To move towards what economists would call an ‘optimal currency area’ [one would need] to regulate such things as general macroeconomic behaviour, inflation rates, wage-setting, labour markets and the relationship between the tradable and the non-tradable sectors of the economy and where investment goes. In other words: European economies need to converge at a very fundamental macroeconomic and microeconomic level in order to make currency union work. This was known at the start, [but] each side bet that the convergance would occur on the other side.
If the above policy areas were ever actually regulated at the EU level, it would represent a fairly radical step forwards in the process of European integration. With public animosity towards the EU already on the rise, would such a level of policy coordination really find popular support? Many of you have sent in comments arguing that the EU already has a ‘democratic deficit’ to contend with before it takes on board any more policy areas. Jovan, for example, recently sent in a comment arguing that “the democratic deficit exists because you need to get a university degree in European studies in order to understand how the EU works.”
Professor Moravcsik has rebuffed such arguments in the past by countering that, as well as possessing an extraordinarily effective system of constitutional checks-and-balances, the EU doesn’t deal with much in the way of ‘salient issues’. In other words, the issues that voters prioritise as important and are motivated to organise systematically around (healthcare, pensions, welfare, etc.) are usually handled at the national level. But the issues that Moravcsik lists above – general macroeconomic behaviour, inflation rates, wage-setting, etc. - are salient issues. Does this mean the democratic deficit is bound to become a serious problem?
I’m particularly suspicious of the current state of the debate, which goes something like this: the current proposals can’t solve the problem. We need these very large proposals of which publics will be suspicious, for all kinds of substantive reasons, because current policy is forcing people to do things (and policy changes would force other people to do things) that are extremely costly to them. And the solution to this would be some kind of airy notion of democratic legitimacy, like ‘lets discuss more things in the European Parliament’ or ‘let’s turn more things over to national parliaments’, as if a procedural solution will make people feel better about a substantive problem. That is not just naive and sentimental, it’s actually empirically wrong in the research. People do not judge the legitimacy of political outcomes based on how much they participate; it’s just empirically wrong as political science. They don’t like institutions that are highly participatory, and generally they hate parliaments (even national ones), and elected politicians they hate even more, generally speaking, compared to judges and other things. What they judge is results, so the euro needs to be generating results that people like.
So, what’s the solution? On this question, Professor Moravcsik seemed reluctant to overtly prescribe the best way forward for Europe, preferring to let us make our own minds up. However, here’s what he had to say about the future of the euro:
Europeans should make a very hard-headed, pragmatic decision about whether the euro is a good policy or a bad policy for growth in Europe over the next ten or fifteen years, and act accordingly….
[There is an argument that] either we move forward, or [we will face] the dissolution of the EU; this Wagnarian conclusion. I say no. I say Europe has a choice about monetary policy: take it, or leave it. But, either way, the rest of the European project remains and it’s the greatest single success in international cooperation in the history of the world. And its last 25 years are more successful than anything it’s ever done, whether or not the euro proceeds.
What do YOU think? Is there a democratic deficit in the EU? And is it growing wider as the EU starts to impact increasingly on the issues people truly care about (such as healthcare, pensions and welfare)? Would giving more powers to the European Parliament help, or do people only care about economic results? And would the EU’s record be a success even without the euro? Let us know your thoughts and comments in the form below, and we’ll take them to policy-makers and experts for their reactions.