25 July 2012

TMI/Goldschmidt: The time for federalism has come

Introduction

What if the time for federalism was now?… During his press conference following the European Council of June 28th and 29th, François Hollande clearly expressed his preference for further integration between the members of the Economic and Monetary Union (EMU) rather than pursuing the search for unsatisfactory compromises among the EU 27. If the final objective seems clear – the political union close to Chancellor Angela Merkel's heart but, in his words, “still totally void of any content” – the path to reach it remains entirely vague. It is, however, paved with worthy intentions, calling for the progressive reinforcement of “solidarity” in parallel with the implementation of “integration”.

Noting with interest the French President’s new mindset and wishing to contribute to the forthcoming debate, the Thomas More Institute has conceived a roadmap aimed at defining the steps needed to reach this ambitious objective. To this effect, it has updated and largely reformulated 16 proposals put forward in 2007[1], taking into account the intervening evolution of the political, economic and social context and in particular:

1. A major political evolution within Europe reinforcing the bipolarisation between thoroughly “eurosceptic” populist and nationalist tendencies on one hand and a significant revival of interest, aimed at accelerating the process of federalisation of the Union on the other. The broadening and deepening of the discussion surrounding “federalism” is to be greatly welcomed. One should, nevertheless, make sure that it is the sign of a real constructive ambition and not merely a defensive stance aimed at countering advocates of inward looking policies.
2. The outbreak of the financial crisis that has deeply impacted the European Union, both in respect to relations between Member States and towards the outside world. It has brought into sharp focus the weaknesses of the unfinished EMU project in which a shared “Monetary Union” failed to be complemented by an “Economic Union” the latter remaining fragmented, leaving each Member State largely autonomous, in particular in the fields of budgetary policy and sovereign indebtedness.
3. The adoption of a series of measures that represent important progress at Union level with the implementation of the “de Larosière recommendations” (read more) concerning the financial regulatory/supervisory framework, the establishment of crisis intervention mechanisms (EFSF and ESM), the strengthening of the Stability and Growth Pact, the “Six Pack”, the “Two Pack” and the Treaty on budgetary discipline. However, this progress was achieved at the expense of a growing complexity of the European institutional framework (agreements among 17, 24, 25 or 27 Member States), rendering any understanding of the workings of the Union totally baffling to the average citizen. Furthermore, some of these reforms conceived as a matter of urgency, did not always deliver the intended answers to the challenges of crisis management.
4. The perception of an ever greater interdependence, both between EMU Members and between the eurozone and the other major participants in the world economy. This situation increases significantly the pressure for greater solidarity within EMU and an integrated representation of the EU within the major international organisations and fora (UN, IMF, WTO, G8, G20, etc.)

© The Thomas More Institute