This opinion piece was originally published in the Money Review section of Kathimerini and El Economista.
“Who do I call if I want to call Europe?” Henry Kissinger famously (and allegedly) once asked. No, really. Who picks up the phone at the other end of the line to represent Europe? Who is the sovereign behind the EU who can legitimately claim the chair at the global table?
The answer, of course, is no one fits that role, and the claim to the chair is a complex mix of what is discussed at any given table, the delicate politics playing out at a given point in time, and of course, the personal rivalries of those who claim it.
As a result, Europe is hard to understand. At the heart of the problem is the imperfect architecture of the union. And while it is in external relations, like in Turkey last week (6 April) when there was embarrassing confusion over which EU leader should sit alongside Turkish President Erdogan, where the problem can manifest itself quite vulgarly, it is present in internal deliberations as well.
For every crisis the EU faces, the answer is more Europe. In the financial crisis, the EU built a banking union and created the European Stability Mechanism as a rescuer of last resort. The level of macroeconomic monitoring was tightened. Unconventional monetary policy measures were adopted to allow all members of the euro area to borrow in the financial markets as though they were one.
In the pandemic crisis, EU countries agreed to issue joint debt, even if it is small in size and a one-off. A series of tools have been provided to support expenses relating to health issues and to sustain employment. The EU also financed vaccines and procured doses as a single purchaser, not as separate countries with different means and different clout. These are small miracles in the context of European integration.
But more important than more Europe as the answer to every problem is the need for ‘one Europe’: one voice, one line of command. From the Brexit negotiations to carving trade deals, regulating big tech and procuring vaccines, ‘one Europe’ can demonstrably exert power to serve its purpose.
And while in external representation the lack of one Europe manifests itself in the absence of one clear voice, internally, it manifests itself as the diffusion of power that endangers consistency.
Consider the European Central Bank, which has the job of maintaining euro-area price stability. In a national context, a central bank is the agent of a very clearly defined principal. That gives clarity of purpose but also sets limits and defines the line of accountability. The principal assigns the central bank a mandate and evaluates whether it delivers. Bound by a treaty, the ECB is an agent, but of which principal? The ECB is appointed by one set of institutions; it reports, although not formally bound by the Treaty, to the European Parliament, and can only be dismissed by the EU Court of Justice. But the EU Court of Justice does not evaluate how well the ECB fulfils its mandate unless a case is brought before it. This choice of governance structure leaves the issue of accountability at the ECB’s discretion.
It is true, that the ECB has demonstrated a commitment to accountability in several ways, and that it can exercise power to intervene in line with circumstances in times of stress. But it does that in ways that can be seen as compensating for decisions that other parts of the EU ought to be taking. This avoids the trap of inaction, but the ECB could jeopardise its political legitimacy by assuming ever-increasing discretionary power. Who controls this discretionary power if not the principal? And who is that principal?
The absence of a clear line of command interferes also with the EU’s ambitions for the euro to become a more global currency. As the currency of a big single market, the euro is a natural contender to the dollar. However, any currency can only be as appealing as the sovereign’s willingness to back it. The EU is the sum of 27 sovereigns that openly disagree about what they want from the euro, its level of ambition, and how much should be done centrally. An outsider looking in can at times be baffled by the extent of disagreements. That alone kills the euro’s global appeal.
The most recent inconsistency has come from an unexpected contender. Judges have cast doubts over which courts have the last word over EU law interpretation: the European or national courts. This has been a source of uncertainty that threaten the legitimacy of some ECB decisions beyond discretion issues and is now threatening the legitimacy of the most significant EU architectural advancement: the common debt of the Next Generation EU recovery fund.
Europe is often a ship with multiple captains. The boat moves forward in calm seas, but when the slightest wind puts it off course, it is not easy to steer that boat. It is not so much a question of more Europe rather than less, but of achieving ‘one Europe’. A ‘more-or-less Europe’ is an invitation to go nowhere.