The Community Method and the European Commission As Agenda Setter

The Community Method and the European Commission as Agenda Setter

Maria Amélia Valle-Flor

Research Paper submitted to the

Development Studies Research Seminar Spring 2012

16th April 2012

PDED-WP03/2012

ISEG/UTL, Doutoramento em Estudos de Desenvolvimento PhD in Development Studies

THE COMMUNITY METHOD AND THE EUROPEAN COMMISSION AS AGENDA- SETTER

Abstract Although the Community method is still the main decision-making procedure in the European Union, the European Commission´s monopoly power to initiate legislation has been sidelined. The Commission is no longer the main political initiator of the integration process as this role, in practice, has been largely taken over by the European Council. The aim of this working paper is to analyze the evolving nature of the European Commission in the decision-making process and its role as agenda-setter.

Introduction

The “Community method” describes a decision-making procedure that assigns particular roles to the European institutions and involves a particular kind of interaction between them. Corbett (2011) refers to the essence of the Community method as the interplay of an institution- the European Commission- charged with identifying the common interest and one composed of representatives of national governments- the European Council and the Council. In the absence of a precise definition of the concept1, the main elements of the Community method may be summarized as follows2:  The sole right of the European Commission to initiate legislation;  The co-decision power between the Council and the European Parliament;

1 The role for the institutions under the Community Method is summarized by the European Commission as: “The European Commission alone makes legislative and policy proposals; legislative and budgetary acts are adopted by the Council of Ministers and the European Parliament; and the European Court of Justice guarantees respect for the rule of law”(European Commission 2001). 2 This terminology was developed in the pre-Lisbon Treaty to distinguish the decision-making process in the then “first pillar” from that of in the “second and third pillar”. The Intergovernmental method refers to a decision making that lies outside the statutory approach provided for in the Treaty. It is being used as a more assertive political approach, namely by the European Council and the Council. A process, that alike the Community Method, refers to decisions taken by unanimity and where the European Parliament has a weaker role.

 The use of qualified majority voting in the Council. According to Missiroli (2011) this template came to epitomize a form of “supranational” policy-making in which powers were transferred from the national to the EU level. The Treaty of Lisbon envisages the application of the ordinary legislative procedure (namely the aforementioned Community method) for all areas coming under EU competence. Over time, and over successive treaties, there has been a shift in favor of the more supranational procedures3. These reforms led to a reshuffle of power, either through the transfer of more competences to the EU level or through altered decision- making procedures at the EU level (Biesenbender 2011). Also the legislative decision- making, namely the co-decision procedure, has had a direct effect on the power of legislative initiative by the Commission and on how the Commission exercises that power. This working paper investigates the alleged limitations of the Community method, of which the Commission´s monopoly over legislative initiative, namely its role as agenda setter, is such a crucial element. In part 1 the evolution of legislative decision making in the EU is discussed. Drawing upon the rational model on agenda setting, the Commission´s role in initiating and preparing policy is presented in part 2. In part 3 the Commission´s positioning since the outbreak of the European sovereign debt crisis is briefly examined. This working paper attempts to determine whether the prerogatives of the Commission´s power of legislative initiative has been weakened in the past Treaty reforms and also since the wakening up of the European sovereign debt crisis.

1. Decision Making in the EU and the European Commission´s Power of Initiative

The Treaties assign to the European Commission three main tasks, in order to pursue the general interest of the Community:

3 Garrett (1995) considers the EU´s legal system as the “clearest manifestation of burgeoning supranationalism”, as European law has “direct effect” in national jurisdictions.

1- the quasi-exclusive monopoly on legislative initiative, considered the core element of the Community method; 2- a role of “guardian of the treaties” aiming to ensure the enforcement of the Treaties and secondary legislation; 3- implementing legislation through the adoption of executive measures.

Besides the Commission´s power of initiative, it also enjoys the formal powers to amend and withdraw proposals4. The power to amend is enshrined in the Treaties: “as long as the Council has not acted, the Commission may alter its proposal at any time during the procedures leading to the adoption of a Union act” (art 293 (2) TFEU) There is a broad consensus in the literature that the Commission´s formal and informal influence has declined by the introduction of the co-decision procedure- renamed ordinary legislative procedure- by the Treaty of Lisbon (art 294 TFEU) (Burns 2004, Ponzano et al 2012). To understand this fact it is important to revisit briefly the Commission´s evolving legislative role. The Treaty of Rome envisaged just one legislative procedure, the consultation procedure, according to which the European Parliament (EP) is only asked for a non- binding opinion and the Council is not obliged to take account of the European Parliament’s amendments5 (art 289 TFEU). According to this procedure, the decision- making process lies with the Commission, as initiator of the legislative process, and the Council, as the legislator of the Community system. The cooperation procedure established by the Single European Act of 1986 called for an initial legislative dialogue between the European Parliament and the Council and was the first step towards a modification of the inter-institutional dialogue. Under this procedure the Commission could see its proposal adopted by a qualified majority in the Council in order to secure its preferred outcome. The European Parliament had the power to propose amendments to the common position adopted by the Council. These amendments, if accepted by the Commission- then becoming part of the Commission´s

4 The Treaty sets out the limits for a proposal´s withdraw. The Commission´s last “political withdrawal” happened in 1994 (Ponzano et al 2012). 5 The European Parliament’s opinions were often not even read (Costa et al 2011, Burns 2004).

amended proposal- could be adopted by the Council by qualified majority voting, but rejected only by unanimity6. This procedure enabled the Members of the European Parliament (MEPs) to demonstrate their ability to play a constructive role in the decisional process (Costa et al 2011, Pollack 1999). The co-decision procedure was introduced by the Maastricht Treaty in 1992 and subsequently modified by the Amsterdam Treaty in 1997. Co-decision procedures are applied on almost 90% of all legislation (Kapoor 2011).

1.1 The co-decision procedure

The positive experience of the cooperation procedure convinced the Member States’ representatives to agree to include in the Treaty of Maastricht (1992) the co-decision procedure which implies that the adoption of legislative acts is possible solely with the agreement of both the European Parliament and the Council (Costa et al 2011). The quasi-exclusive right of initiative7 conferred on the Commission by the Treaty drafters, lied on the fact that its legislative proposals would be based on the general interest of the Community. “The Commission represents the general interest and is equipped with the monopoly of initiate and powers to oversee implementation; Member States voice particular interests through their role as legislators in the Council and implementers of EU policy (…) one consequence is that decision making should protect smaller Member States against the dominance of one or several large Member States by giving the Commission the monopoly of initiative and by over representing smaller states in decision making” (Haas 1958:526-7). As Ponzano et al (2012) point out this is the main reason why the European Parliament, where the smaller Member States were not sufficiently represented to defend their interests, was not conceived as the initiator of the legislative process. The

6 The cooperation procedure was repealed by the Treaty of Lisbon. 7 These rights were conferred by the Treaty of Rome, which already provided some limited exceptions, regarding: customs duties, air and sea transports and statistics. These domains could be regulated at the initiative of a Single Member State. The Maastricht Treaty and the Lisbon Treaty provided new exceptions, namely those regarding the former second and third pillars. In these areas, both the European Commission and each Member State could submit proposals to the Council of Ministers.

authors refer also to the fact that the insertion of the co-decision procedure was a way to reply to the longstanding debate over the democratic deficit in the European Union: political outputs should be congruent with democratic inputs, meaning people affected by a policy should have a say in its formulation (Eilstrup-Sangiovanni et al 2006). While Liberal Intergovernmentalists like Moravcsik considered that, in the context of a multi- level system, “there is little evidence that the EU suffers from a fundamental democratic deficit” and that political authority should remain with the EU Member States (Moravcsik 2002), Pro-integrationists hold that one possible solution to the democratic deficit encompasses enhancing the powers of the European Parliament. In fact, through the introduction of co-decision, the European Parliament was given a role equal to that of the Council of Ministers. According to Costa et al (2011) two objections were raised. At the same time that MEPs demanded equal footing with the Council, the Member States´ representatives were reluctant to accept the idea of directly negotiating with the parliamentarians. After a period of intense negotiations and inter-institutional agreements8, the co- decision procedure was amended in the Treaty of Amsterdam (1997)9 which further extended it to cover additional policy areas10. As Burns (2004) points out a key development arising from the co-decision procedure has been an intensification of informal inter-institutional contacts11. These informal

8 The inter-institutional agreements comprised: Declaration nº34 (annexed to the Treaty of Amsterdam), the “Joint Declaration on Practical Arrangements for the Co-decision Procedure” (May 1999), “Better Regulation Agreement” (2003) and “Joint Declaration on the Practical Arrangements for the Co-decision Procedure” (2007). These inter-institutional agreements stipulate the procedures provided by the Treaties, but, in order to facilitate the decision-making process, they may include alternative arrangements which limit inter-institutional disputes (Costa et al, 2011). 9 Co-decision under the Maastricht Treaty and the Amsterdam Treaty is sometimes referred to as Co- decision I and co-decision II. 10 The initial version of co-decision set out in the Treaty of Maastricht was a highly complicated procedure compared to previous legislative procedures. It could include as much as four readings in the European Parliament and two rounds of conciliation between the European Parliament and the Council (Rasmussen 2003). 11 While in co-decision II informal contacts between the EP and the Council may start in an early phase of the decision making process, under co-decision I it was unusual for both institutions to contact each other until after the Council opinion on the EP´s second-reading amendments. Piris (2011) refers that the EP often tries, through pressure, to get new powers not conferred on it in the Treaties:”Its technique is to group together two or several files, some of which require its consent or co decision to be adopted, while the others only require a consultative advice. The EP then makes known that it will give its

contacts provide information and expertise to legislators in the European Parliament and the Council, and ultimately shape political outcomes (Hix 1998). Farrell and Heritier (2007) argue that periods of everyday politics between Treaty changes will involve the creation of informal institutions that structure actors’ relations within the legislative process and that these informal institutions may, in turn, affect future rounds of Treaty change. Since the Maastricht Treaty there has been a change in the way agreements are made within the co-decision procedure. That translates in the number of agreements settled on first reading which have risen dramatically in recent years at the expense of those made on second and third reading. This development has a number of implications for the negotiations between the three institutions, the Commission, the European Parliament and the Council, since the rules that apply to a first reading is not the same as those that apply to a second or third reading. In the co-decision procedure, the legislative process formally begins when the Commission drafts a legislative proposal. However, some informal procedures may develop. It has been common practice that the Commission, before formulating the legislative proposals, consults the Council´s groups of experts and the EP parliamentary committee (Costa et al 2011). After the proposal is adopted by the College of Commissioners, it is simultaneously sent to the Council and to the European Parliament where it is respectively reviewed by a working group12 and a parliamentary committee. Subsequently, the Parliament and the Council negotiate in order to reach an agreement on which amendments should be added to this proposal. For the proposal to become law, the Parliament and the Council must accept each other’s amendments. A “trilogue” with the European Commission can be set if both the Council and the EP want to “accelerate” the decision-making process. Indeed, Commission representatives monitor negotiations between the two institutions in order to ensure that the compromise does not deviate too much from agreement on the first files only if and when the Council will have accepted its requests on the other files”. 12 The European Parliamentary Committee appoints a rapporteur, as well as some “shadow raporteur” who belong to other political groups rather than that of the raporteur.

the initial proposal. The Commission is often understood as a “mediator and a supplier of expert knowledge” in these negotiations (Fuglsang and Olsen 2009). If an agreement is not found at the first or second reading, the Conciliation procedure13 is convened by the Council and the EP being responsible for reaching an agreement on a joint text. The Commission takes part in the Committee´s proceedings and may take initiatives to promote a consensus. Negotiations can therefore go on up to three readings before the legislation can be adopted14. The Commission’s position has been weakened as a direct result of the Parliament’s major gain in co-decision powers. In fact, “the Commission is regarded as having legislative influence when it successfully manages to persuade the Council and the Parliament to adopt elements in the final legislative texts that are different from what they would have been without its participation” (Rasmussen 2003). The author claims that the Commission has often been successful in influencing the adopted amendments through its ability to act as a strategic facilitator. This is the more important as if the proposal goes into the conciliation phase, the Parliament and the Council can agree on a compromise irrespective of the Commission´s position. Hence, the Commission´s power to amend a proposal in the first and second reading of the co-decision is not available in the conciliation phase (the third reading). At this stage the Commission can no longer modify its proposal and influence the voting rule in the Council. Also, in the conciliation phase the Commission cannot exercise its right to withdraw legislation at any point in the legislative procedure (Monar 2010). According to Fuglsang and Olsen (2009) informal meetings between the “trialogue” before the formal presentation of the proposal may result in that the original proposal does not correspond entirely to the Commission´s preferences, as it may incorporate

13The Conciliation Committee, composed of 27 members of the Council or their representatives and an equal number of members representing the European Parliament, have the task of reaching agreement on a joint text, by a qualified majority of the members of the Council and by a majority of the members representing the European Parliament within six weeks of its being convened (on the basis of the positions of the European Parliament and the Council at second reading) (art 294(10) TFEU). 14 In 1997, the Amsterdam Treaty made it possible to adopt proposals at first reading, setting the ground for quicker decision-making. In the years between 1991 and 2009, consultation, cooperation and co- decision, all coexisted within the framework of the Community method.

the Council and EP preferences as well. The authors refer to a “new negotiation culture” with a growing openness and trust between the three institutions15. As mentioned above, formal meetings can only take place during the conciliation procedure. Some authors argue that relationship between the Council and the European Parliament in conciliation has excluded the Commission from decision-making and it is this fact -that the Commission has little input into the final stages of decision-making- that has led to a broad consensus across the literature that the Commission´s formal legislative role has been diminished by the introduction of co-decision (Burns 2004, Vitorino 2012).

Different studies analyze the reasons behind the increasing number of proposals adopted on first reading (Costa et al 2011, Fuglsang and Olsen 2009)16. These authors refer to the following factors: the minimization of costs (interpreting and translation), the closer contacts between the “trilogue”, the increasingly difficult task to find a common Council position among the 27 Member States and the Council Presidencies. Despite the adoption of a “trio” system designed to harmonize the Union’s political agenda, the Council´s Presidency tends to choose the proposals which it wishes to see adopted by the end of its mandate. First reading agreements constitute privileged instruments in this regard (Allerkamp 2010). The Council Presidency is sometimes perceived as “both the driving force and the winner in terms of first reading agreements, which allow it to show a flattering report at the end of its mandate” (Costa et al 2011). There is a growing tendency to make political deals between the Parliament and the country holding the rotating presidency in the Council, namely bilateral and informal contact with the rapporteur in the Parliament to reach a quick deal that satisfies the wishes of the Council’s presidency and the political ambitions of the rapporteur at the same time (Costa et al 2011, Fuglsang and Olsen 2009).

15 The growing percentage of first reading agreements and the informal meetings between the “trialogue” have been subject to criticism from MEPs, as they lack transparency, an open political debate and do not produce any report or minute accessible to the public ( Costa et al 2011). 16 In the last years around 72% of legislative acts are adopted at first reading (Costa et al 2011).

The Commission is often presented as the main loser in situations involving early agreements in the decision making process (Ponzano et al 2012). It can, however, benefit from them, in that the longer the decisional process, the more likely it is that the outcome will differ from its initial proposal. In the co-decision procedure in the second and third readings the negotiations take place on the basis of the proposal as amended by the two legislative institutions.

2. Agenda-setting in the European Commission

Institutional influence was analysed both by New Intergovernmentalists and New Institutionalists. New Intergovernmentalists of the 1990´s already accepted that Member States might at times choose to pool or delegate decision-making powers to supranational “agents”, but only under strict surveillance and within certain limits (Pollack 2007)17. A strand of Rational-Choice Institutionalism (RCI) focused on agenda-setting power as a source of institutional influence over policy18. An example of this approach is Pollack´s analysis of the agenda-setting powers of the Commission (Pollack 1999). Drawing upon principal-agent analysis, he argues that the Commission (as an agent) can exploit differing preferences among its principals (Member States) to procede along its own preferences and that the Commission´s agenda-setting power depends on the decision-rules governing new legislation. Pollack (1999) offers a clarification of the concepts of formal and informal agenda setting: formal agenda setting refers to “the ability of an actor to set the procedural agenda of a legislature by placing before it legislative proposals that can be adopted more easily than they can be amended, thus structuring and limiting the choices faced

17 The delegations of powers comprehend monitoring, compliance with agreements, solving problems of incomplete contracting, providing technical expertise and reducing instability for a single legislative agenda setter. Principal Agent theory agrees with the claim that principals delegate powers primarily to reduce the transaction costs of cooperation (Polack 2007). 18 Rational-Choice analysts have studied the functioning of the Council, Commission, European Parliament and ECJ and the way they interact. They focus on two main issues: why and under what conditions will Member States “principals” delegate power to supranational “agents” and to what extent are agents empowered by such delegation to act in an autonomous manner.

by of a group of legislators”19 while informal agenda setting is “the ability of a “policy entrepreneur” to set the substantive agenda of an organization, not through its formal powers, but through its ability to define issues and present proposals which can rally consensus among the final decision makers”. The Commission´s formal agenda-setting power is thus greater when the voting rule is some form of majority, and where the amendment rule is restrictive-in other words, where it is easier for states to agree to adopt the Commission´s proposall than to amend it. This view is shared by Moravcsik, who considers that qualified majority voting makes the formal decision-making of any single government more dependent on agenda-setting by the Commission (Moravcsik 1993). Drawing upon this concept of formal agenda-setting, it can be infered that the Commission´s power was limited with the consultation procedure-where both the amendment rule and the voting rule in the Council are unanimity- and that the introduction of qualified majority voting and the co-operation procedure in 1987, strenghtened the Commission´s influence (Burns 2004). In respect to the co-decision procedure, there is a broad consensus that the Commission´s formal and informal influence has diminished as the Commission has little input in the final stages of decision-making, namely during the conciliation procedure. The fact that the Commission has no formal right to affect the outcome of legislation in this final stage of co-decision, reduces its policy influence and its desired outcome, making the proposals “irrelevant” (Crombez and Hix 2011). It may be argued that the Commission has lost the agenda-setting power it enjoyed under co-operation. However it should be stressed that the Commission´s agenda‐setting power rests also on the fact that under qualified majority voting, adopting a Commission proposal is easier for the Council than to alter it with unanimity (Allerkamp 2010, Ponzano et al 2012, Burns 2004).

19 In an IGC, supranational organizations possess no formal agenda-setting powers of any kind (Pollack 1999).

2.1 Who sets the Agenda

Three theoretical approaches to agenda setting emphasize different issues in the process of decision-making. The rational organization model focus on the formal structuring of agenda setting processes: the agenda setting phase (initiating and preparing policy), the formal policy-making phase (described above) and the policy´s implementation phase. According to Larsson and Trondal (2005) the agenda setting phase “is perhaps the most open-ended part of the EU decision making process” whereas the number of actors involved is to be considered20. The authors point out the active role of the Commission expert groups and how expertise may become dominant over politics21. The same concern is expressed by the Commission´s White Paper on governance: “It is often unclear who is actually deciding-experts or those with political authority”22. Agenda-setting is a highly political process as it not only determines which issues are taken up and in what terms for decision-making, but also those that are kept off the agenda23 (Princen 2007). A Historic Institutionalist perspective is given by Pierson (1996) who claims that European institutions such as the Commission, the European Court of Justice (ECJ), and the European Parliament are always “looking for opportunities to enhance their powers” and advance their own interests. Setting the agenda, is for the Commission a source of influence, namely the choice of which proposals to be considered. Yet, as Pierson points out, the Commission´s power is far from unlimited; the Commission cannot expect to pass proposals that ignore the preferences of Member States. From a multi-level governance perspective, the European Commission has significant autonomous influence in settling the EU agenda. As to the state-centric model, this

20 Larsson and Trondal (2005) refer to the EU agenda setting being characterized by the summing-up of 27 national agendas, the bargaining processes among the Member States within the Council, the inter- institutional “turf-battles” and also interest organizations. 21 Apart from the EU institutions, interest groups also try to gain access to the Commission, in order to influence the agenda at an early stage (Greenwood 2003). 22 Commission COM (2001) 428. 23 The terms ‘on’ and ‘off’ the agenda are still used to denote the distinction between those issues that receive ‘considerable’ or ‘serious’ attention and those that receive only little attention.

formal power is “largely decorative: in reality the European Commission draws up legislation, primarily to meet the demands of state executives” (Marks et al 1996).

The power of initiative has increasingly become a shared competence. As Princen (2007) points out even though the Commission has to make the eventual formal proposal, the impetus for this proposal may lie outside of the Commission as both the Council of Ministers and the European Parliament may use its right to “invite” de Commission to present a proposal24. In fact, the Council and, since the Maastricht Treaty, the European Parliament can request the Commission to produce proposals, although they cannot draft proposals themselves. If the Commission does not submit a proposal, it has to inform both the European Parliament and the Council of the reasons. Allerkamp (2010) considers that the right to initiate legislation is shared with the very institutions which subsequently decide upon it. As discussed earlier, Council Presidencies began to exploit this window in the legal texts from the mid-1980s. As Ponzano et al (2012) point out the Commission generally bases its texts on the compromise drafted by the Presidency of the Council. The Treaty of Lisbon also extended the “indirect” right of initiative, by establishing the “European Citizen´s Initiative”, an instrument of direct democracy that gives a voice to ordinary votes. From 1 April 2012, one million signatures from at least seven Member States of the EU can urge the European Commission to come forward with legislation. The Commission is obliged to respond to the request.

Processes of agenda-setting go far beyond the activities of the Commission itself and it may be difficult to assert which actor influenced the original Commission´s proposal.

24 “Indirect” right of initiative-by granting the European Parliament (art 225 TFEU) and the Council (art 241 TFEU) the power to invite the European Commission to submit legislative proposals, was also provided by the Maastricht Treaty. Monar (2010) considers that the Commission´s exclusive right of initiative is further undermined by the newly introduced citizens´ initiative established by the Lisbon Treaty.

Agenda-setting is now a shared competence among the four European institutions, rather than monopolized by the Commission. As Princen (2007) argues it is generally impossible to identify one ultimate source of a proposal25.

As pointed earlier, most of the informal procedures before the adoption by the Commission of a new proposal result in extensive dialogues among the Commission, the Council and the European Parliament. According to Costa et al (2011) preceding the formal proposal, the Commission consults the Council’s groups of experts and more and more often relies on exchanges with the competent EP parliamentary committee. Fuglsang and Olsen (2009) consider that the role of the Commission as agenda-setter has to be more politically-oriented, understanding the terms and the political preferences of the other actors in the informal meetings, setting the agenda and promoting its own preferences26. Since the 1990s although the Commission still enjoys the exclusive right to initiate legislation, which is for Allerkamp (2010) the most obvious way for the Commission to set the EU´s political agenda, it is no longer the main political initiator of the integration process as this role has been largely taken over by the European Council (Emmanouilidis and Janning 2011). The European Council started including in its “conclusions” policy “requests” for the Commission, a practice which was never formalized in the Treaty and led to a broad consensus that the European Council is taking the role of an informal pre-initiator of legislation.

25 Marks et al (1996) refer also to the influence of interest groups, mainly after of the Single European Act. According to a Commission report, some 3000 interest groups and lobbies, or about 10000 people, were based in Brussels in 1992. Most groups target their lobbying activity at the European Commission and the European Parliament (Mark et al 1996) 26 According to Fuglsang and Olsen 2009, the Commission´s inability to act politically lies in its dual internal organization: the top political level (Commissioners and the Secretariat General) and the civil servants which lack political expertise. The Secretariat-general published a guide where it clearly states that “(…) there is nothing to stop the Member of the Commission in question from taking the initiative of convening a trilogue, where necessary, in which case it will be held on Commission premises (…)” (Commission 2008- Codecision Procedure- Article 251 EC. Guide to Internal Procedures)

3- The European Commission and the European Sovereign Debt Crisis

Besides the Commission´s formal agenda-setting power to initiate legislation, another perspective of agenda processes can be observed drawing upon a definition of “agenda” as “the list of issues that receive serious attention in a polity” (Princen and Rhinard 2006). These issues can emerge to the agenda in two different ways: either they are placed by the European Council, the so-called “high politics” route or they come into the agenda through Commission Expert Groups or Council Working Parties- the “low politics” route. According to Meyerhöfer (2009) the high politics route is primarily a political one, as the issue coming into the agenda reflects the occurrence of a shared political problem, while the low politics route is primarily a technocratic one. The European sovereign debt crisis created the framework conditions for the predominance of the high politics route. Not only the Treaty of Lisbon, but also the debt crisis had a strong impact on decision- making (namely economic decision-making) in the EU and also led to the resumption of the debate between the Community method vs Intergovernmental method. The Treaty of Lisbon created the permanent Presidency of the European Council, tasked with preparing and chairing the meetings of the Heads of State and Governments as well as conducting working committees between summits. This was a determinant factor leading to an increasing steering capacity and political importance of this new European institution, calling into question the Commission´s capacity to act as agenda-setter (Schwarzer 2012). Also, the Treaty of Lisbon did not sufficiently reinforce the economic and financial policy competences of the EU institutions (like the European Commission and the European Parliament). Therefore, the European debt crisis strengthened the role of the European Council as it called for rapid economic policy decisions within the framework of more flexible intergovernmental agreements and outside the regular legislative process (Gloggnitzer and Lindner 2011).

The institutional framework and the tools for economic governance provided by the Treaty of Lisbon were inadequate for preventing or resolving the crisis. Up to April

2012, the EU response comprised legislative reforms aiming to reform economic governance and the establishment of financial supervision and financial stabilization mechanisms. However, most of the measures taken to remedy the crisis were agreed through intergovernmental decision-making rather than through standard EU procedures27. Kapoor (2011) points to the fact that the severe time pressure from the markets and the nature of the decisions-involving large fiscal national commitments that not fall under the competence of the Union- led to the more intergovernmental arrangements. The European Union lacked the speed of decision-making; the large financial resources; and the legal instruments that were needed for an appropriate response to the unprecedented financial crisis that hit Member States28. The perception that Member States were increasingly using the intergovernmental approach over the Community method was subject to sharp criticism from a number of stakeholders including Commission President Barroso and several MEPs. The concerns being expressed underlined the fact that an intergovernmental approach would disturb the normal balance of power between EU institutions; it would not engender economic discipline; it would result in a fragmented 'multi-speed' Europe; and the agenda setting would be dominated by the more powerful Member States- Germany in particular, as the biggest contributor to any rescue package. In 2010, Chancellor Angela Merkel refuted these concerns: “As a representative of a Member State I would like to say now that it sometimes seems to me that the representatives in the European Parliament and in the European Commission see themselves as the sole true champions of the Community method” arguing that the intergovernmental method was too a legitimate European approach29. This statement was reinforced by the President of the European Council, Mr Van Rompuy, who suggested that “often the choice is not between the Community method and the

27 In the past two years, crucial decisions have shifted from the Council to the European Council where decisions are usually taken in the form of a consensus. This fact also led to the recent statements that there was a strengthening of the inter-governmental nature of decision making (Pisani-Ferry et al 2012). 28 According to Kapoor (2011) The ECB was the only EU institution that emerged more powerful from the crisis with both the Commission and the European Parliament losing perceived power. 29 Speech by Federal Chancellor Angela Merkel at the opening ceremony of the 61st academic year of the College of Europe in Bruges on 2 November 2010.

intergovernmental method, but between a coordinated European position and nothing at all”30. The debate over Community method vs Intergovernmental Method has to be looked upon with caution31. Corbett (2011) points out to the fact that the perception of a shift of powers to the European Council must be understood in the context of a macro-economic reform- a matter of coordinating national policies. While 98% of public spending in the European Union is national or sub-national, only 2% is managed by the European budget. As Kapoor (2011) argues, it is important to make a distinction between the agenda- setting power triggering the legislative process32 and the power inherent in the content of the legislation. Even where the Commission has lost relative power as a result of intergovernmental arrangements, the Commission´s power is set to increase significantly as a result of additional legislation and stronger economic governance. In fact, all the legislative proposals are putting more implementation and oversight power into the hands of the Commission33. Recently, on 2 March 2012, EU Member States –with the exception of the UK and the Czech Republic – signed the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG). This intergovernmental Treaty, which includes

30 http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/117729.pdf. 31 The institutional reforms of the Treaty of Lisbon and the abolition of the three-pillar structure of the EU have made it more difficult to strictly classify the EU´s decisions as supranational or intergovernmental (Monar 2010). Vitorino (2012) calls the attention to the fact that the European Council´s interventions should not be confused with the Intergovernmental Method. 32 The Financial Stabilization Mechanisms (EFSM, EFSF and ESM), the EuroPlus Pact and Europe 2020 all were a result of Intergovernmental arrangements. The European Semester is an Intergovernmental arrangement in the form of code of conduct between the European Council, the Ecofin, the European Commission and Member States (It has a supranational legal effect by incorporation in the six-pack legislation). Regarding the Financial Regulatory Reform the Commission kept all its agenda-setting power and the Community Method dominates (one reason maybe that this process is more technical than political). The “6-pack” legislation was initiated by the Commission under the Community Method, although it is debatable whether they were not a response of the May 2010, European Council Summit´s conclusions.

33 One example of the stronger role of the Commission in the “6-pack” legislation is the “Reverse QMV”- the Commission´s proposals will now stand adopted, unless there is a qualified majority against them in the Council. Also, the European Stability Mechanism (ESM), though it is an intergovernmental arrangement, the assessments of the need for financial support, the definition of the conditionality for loans and the negotiation of a macro-economic adjustment programmes, all lie in the competence of the Commission.

the so-called fiscal compact, has been heavily criticized namely by its lack of added value34. According to Emmanouilidis (2012), although being an intergovernmental treaty, the European Commission and the European Parliament were strongly involved in its elaboration35 and the new Treaty also strengthens the existing institutions36. Pisani-Ferry et al (2012) also recall that the TSCG while being intergovernmental has strengthened the European Commission’s role by introducing reversed qualified majority voting on EDP (Excessive Debt Procedures) steps. Already in 2002, Schoutheete and Wallace referred to the European Council as a paradox wherein a high-powered intergovernmental body has substantially contributed to making the Union more supranational.

Conclusions

Though the successive treaty reforms did not change the Commission´s prerogative of initiating legislation- which is the core element of the so-called Community method- its power has been eroded by the adoption of the co-decision procedure. The Commission finds itself acting more like an “honest broker” and mediator between the two co- legislators- the Council and the European Parliament. In fact the practice of formal and informal negotiations between the two institutions since the first reading has limited the Commission´s ability to modify its proposals. The Commission´s role as agenda setter has been gradually offset by the Council and the European Parliament. As Ponzano et al (2012) point out “the Commission has increasingly engaged in drafting legislative proposals in response to more or less explicit demands or mandates received by other institutions”.

34 Critics point out to the fact that all of its content could have been implemented via secondary EU legislation and did not require a separate intergovernmental treaty outside the Union's legal framework (Emmanouilidis 2012). 35 Parliamentary negotiators have been asked to participate in the treaty´s drafting. The chamber chose leaders of its 3 main parties to represent it. 36 In particular, countries which are seen to have broken the fiscal rules can be taken to the ECJ by other members or the Commission.

Also, the European Council, though in an informal way not envisioned by the Treaties, has transformed the European Commission in a reactive initiator instead of an autonomous one. The debate over the use of the Intergovernmental method in the recent economic governance reform must be nuanced. Although there are some legitimate concerns with the increased use of the Intergovernmental method, the fact is that a very significant transfer of sovereignty is underway with the increased degree of common economic policy making- areas that have so far been seen as a national prerogative (i.e. macroeconomic imbalances). The increasing use of the Intergovernmental method has further reduced the legislative and political influence of the European Commission on matters of economic governance. The Commission has failed to lead Europe’s response to the financial crisis (as providers of the financial resources the Member States gave the Commission no say in the matter) and has committed itself to following up the European Council´s demands. However the emerging new economic governance architecture appears to ascribe a much more central role to supranational institutions like the European Commission. Haas (1958:526-7) described European integration as “a hybrid in which neither the federal nor the intergovernmental tendency has clearly triumphed”. The years to come will test this statement.

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