BASIC PRINCIPLES FOR THE DEMOCRATIC LEGITIMACY OF EUROZONE GOVERNANCE

“The institutional architecture of the EMU is a lenges in organising an effective accountability mech- mixed system which is cumbersome and requires anism. Decentralised accountability – holding national greater transparency and accountability” ministers responsible for what was agreed at EU level – risks pitting different democratic electorates against - European Commission Reflection each other, undermining trust and good governance paper on the deepening of EMU at EU level.

The idea that the EU lacks democratic legitimacy is not Recent French elections and the European Commis- new and has contributed to Brexit and fuelled the nar- sion’s reflection paper on deepening European Mone- rative of illiberal movements in Europe. When it tary Union (EMU) have reenergised the debate on Eu- comes to the Eurozone there is certainly cause for rozone reform. To help make democratic legitimacy in concern over a lack of accountability. It is vital that the EU economic governance more than lip-service, the EU overhauls the democratic process of how the euro undersigned group of civil society organisations de- is governed, ensuring accountability in good times as mand that the three basic principles listed below well as in times of crisis. should guide the reform process, to ensure legitimacy The ad hoc strengthening of economic governance and consistency with the spirit of the Sustainable De- rules and institutions in the midst of the euro crisis has velopment Goals. The EU Charter on Fundamental exacerbated challenges to the democratic legitimacy of Rights and the EU Pillar of Social Rights should also be the Eurozone. There is a consensus that the current mainstreamed into all aspects of economic govern- governance arrangements are incomplete, and that ance. democratic accountability in particular needs improv- Reform of the way the Eurozone economy is governed ing. The European Commission, the European Council, requires fundamental decisions that will have an im- the Eurogroup President, the European Parliament pact on basic public services and the life opportunities and European Ombudsman have all called for greater of citizens. Eurozone institutions therefore need to be transparency and democratic control on the coordina- responsive to their concerns directly and indirectly. tion of economic policies by the EU. We welcome the European Commission’s proposal to Blurred responsibilities between the national and Euro- formalise the democratic accountability of euro area pean levels make it difficult to understand where deci- governance with an agreement between the Member sions are effectively taken. When EU institutions exert States, EU economic governance institutions and the discretion beyond what can be agreed unanimously European Parliament before the European elections, among Member States, this poses a number of chal- which should later be included in the EU treaties.

1/2 The principles that underpin these institutions and de- governance. Giving this role to the Commission can cisions-making processes should be: help replace negotiating dynamics centred on national interests with a focus on the European public interest. . TRANSPARENCY – the public should know who is in charge The Commission has discretion in the application of economic rules. This discretion should be applied in a Transparency is a prerequisite for democratic and ac- transparent way. Rules on economic imbalances countable governance. As things stand, the Eurogroup should be applied with the same conviction as rules on has no formal decision-making authority, but pre- debt and deficits, in order to reduce economic imbal- agrees euro area decisions that are subsequently rub- ances and promote growth and investment. Likewise, ber-stamped by the Ecofin Council. Citizens do not to achieve an optimal fiscal stance for the euro area as know who is ultimately responsible – ‘Brussels’, the a whole, countries overshooting their fiscal targets Commission, Eurogroup, Ecofin, the ECB in Frankfurt, should be pushed to adjust their policies just as much national governments or even individual ministers. as countries undershooting their deficit targets.

Institutions’ responsibilities should be spelled out . DEMOCRACY - include all relevant clearly: by way of example, the European Stability stakeholders into decision-making Mechanism looks like an EU institution in public per- ception, though it remains outside the EU treaties. At Decision-making needs to be democratised by being the same time, the reform conditions it attaches to its more inclusive and participatory. Eurozone govern- ’bailout’ programmes are directly controlled by the ance is currently a top-down exercise. On the national Member States. Proper accountability starts with level, participation of social partners and civil society identifying who is effectively responsible. should be encouraged by including them in national fiscal boards and competitiveness councils, as well as If meetings are not public, institutions should clarify encouraging a domestic parliamentary debate on the proactively what trade-offs and compromises were European Semester ahead of national submissions, in- made to achieve consensus or a qualified majority, e.g. creasing national ‘ownership’. At the European level, via redacted minutes. Preparatory bodies such as the an element of participative democracy can best be or- Eurogroup Working Group and Economic and Finan- ganised via parliamentary involvement, complement- cial Committee should disclose their meeting agendas, ing the views of the Commission and the Council, with forthcoming meetings, and programme of work. those of social partners, think tanks, NGOs, academics, and more, in structured public hearings. . ACCOUNTABILITY – align decision- making and responsibility Furthermore, decisions that affect every aspect of the delivery of public services, e.g. on budgets and eco- Accountability should happen at the level at which de- nomic policy, should not be reached via ‘peer-pres- cisions are effectively taken. If decisions on national sure’ among government representatives only, as this budgets are effectively taken at EU-level, then control excludes all opposition parties, and amplifies the ne- over such decisions equally needs to be moved to the gotiating power of the largest states. European level. If budgets remain a shared responsi- bility, then some EU-level accountability is needed for As an example, giving real co-decision powers to the the recommendations issued as part of the European European Parliament on EU-level economic govern- Semester. This can be done without prejudice to na- ance decisions can improve democratic engagement tional parliaments’ budgetary prerogatives. in the process. This could be done for important deci- sions such as opinions on draft budgetary plans and For example, an improvement in the Eurogroup’s ac- country-specific recommendations, bearing in mind countability could be brought about via the introduc- that national parliaments have the final say. Today, tion of a full-time Eurogroup President, answerable to the European Parliament is only consulted and rou- the European Parliament. This would recognise the ex- tinely faced with done deals, limiting its engagement ecutive nature of Eurogroup decisions and the need to in the European Semester process. increase parliamentary responsibility for economic 2/2