Eurobonds and democracy must go together
Economists are increasingly in agreement that some form of Eurobonds will be necessary to overcome the sovereign debt crisis in Europe. Eurobonds would ensure liquidity in the Eurozone and create a unified European bond market large enough to stop speculative sovereign debt attacks.
But leaders and decision-makers should know that the economic problems will not be resolved without ultimately resolving the democratic problems as well. Eurobonds must be set up not with the perspective of appeasing the markets alone, but with the perspective of restoring control over the markets both by politics and by European citizens.
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Most of the policy-orientated debate about how to resolve the economic and financial crisis focuses narrowly on economic and financial issues, without taking into account wider questions of citizenship and democracy.
The rising resentment among Europeans at having economic policies dictated to them, either by market conditions, by the European Central Bank and IMF, or by other countries, risks becoming extreme and undermining any ‘purely economic’ measures taken to restore market confidence in the Eurozone. Such problems are already holding up the totally insufficient measures to shore up Greece’s economy.
Eurobonds would be the concretisation of the common good of the European economy, and the symbolic acknowledgement of mutual dependence between euro member states. This symbol would be important not only for the markets but also, and just as importantly, for the people of Europe.
It is precisely this symbolic charge which is causing such resistance in many countries. Good leadership is required to overcome this resistance by explaining that the status quo is not only untenable but also unjust and undemocratic.
The current institutional set-up has at least three problems:
It gives too much power to the economically powerful EU countries, which are able to play the role of paymaster in times of crisis and impose their economic policies on other countries in the name of respecting the rules of the free market (which continues of course to preserve all their competitive advantages).
It provides little accountability of European governments to other European citizens for their fiscal policies. The threat of sanctions by the European institutions is weak, and that leaves no other means of accountability except for creditor countries ‘punishing’ the citizens of deviant countries through austerity measures or higher levels of interest on loans.
Too much power is in the hands of financial speculators, banks and rating agencies, which are able to effectively dictate policies to democratically elected governments.
At least two of these problems go together. There cannot be effective governance of the European economic area without those countries that currently benefit from the unfettered rule of the market giving up their advantage. But those countries will not give up their advantage so long as other countries benefitting from the common good of the European economy are not held accountable for their policies.
For this, Eurobonds must be set up in a way that forces the member states that jointly guarantee them to work together in the general interest of Europeans, and not to be held hostage to the most economically powerful member states (this promotes deviant behaviour in some states which try to get an economic advantage by not obeying the rules).
Currently the European Council is on course for the least preferable outcome for the vast majority of European citizens: one in which strict budgetary rules are defined by the most economically powerful European countries, with more rigorous enforcement and sanctions by European institutions for countries which deviate from these rules.
This solution turns citizens outside the most economically powerful countries into second-class citizens.
And as far as accountability goes, it is only the accountability of the economically less powerful to the economically more powerful.
Two class Europe
Eurobonds must be established in order to restore control over the financial markets, and this control must be given to citizens through democratic institutions which are responsible to all European citizens.
Without accompanying measures to ensure democratic decision-making, the introduction of Eurobonds risks pulling economic decision making even further out of the hands of citizens.
The rebellion of the second-class citizens, or their governments, would then be impossible to rule out.
For this reason, the European Council cannot be allowed to usurp all economic decision-making from the European Commission which ensures the general European interest.
And economic decision-making cannot be excluded from the ‘ordinary legislative procedure’ introduced in the Lisbon treaty, which gives as much weight to the European Parliament as to the governments in decisions that affect all Europeans.
We must call for Eurobonds in order to have European democracy.
The author is co-president of European Alternatives