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Economic Governance and the Constitutional Treaty

Economic Governance and the Constitutional Treaty

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About this Event

17 Sep 2004

Economic Governance and the Constitutional Treaty

About the Speech:

Speech by John Bruton TD to the Institute of European Affairs on Friday 17th September 2004

Economic Governance and the Constitutional Treaty

“In the debate about the problems of making the Stability and Growth Pact work, we should not lose our sense of proportion. Not withstanding the fact that some countries are failing in their EU constitutional obligations in regard to budget deficit, the euro itself continues to be very successful. Not only has inflation been kept in check, but the euro is now being used more than the dollar in most categories of international transaction, eg bond issues. This shows that our new currency commands strong international confidence.

“But the euro has not yet had to withstand a serious international crisis. In a sense, the difficulties of the US deficits are such that the dollar causes most worries and this takes pressure off the euro.

“That said, there are underlying problems with the implementation of the Stability and Growth Pact. These implementation problems will still be there even if the wording of the Pact is reformed to take more account, for example, of investment, of the business cycle, of short-term deficiencies in demand or of the differing debt to GDP ratio of different countries.

“The implementation of this Pact problems can be boiled down to one issue: ‘democratic legitimacy’. Political opinion in member states is not, in its heart, yet ready to accept that the European Commission would determine the overall numbers of the annual budget of individual member states. Given that the Commission is doing no more than giving effect to Treaty obligations that the states themselves readily entered into, one could say that public opinion is being unreasonable. But, in a democracy, public opinion unfortunately has the right to be unreasonable!

“Public opinion in some member states feels, in effect, that the Commission has not been given the democratic legitimacy to impose the sort of strictures it is obliged by the Treaty to impose.

“How do we go about giving the Commission the necessary democratic legitimacy to easily implement the Stability and Growth Pact, whether the Pact will be its present form or in a revised form?

“I believe that there are two possible approaches to giving the Commission the necessary democratic legitimacy. They are not mutually exclusive.

“One is to have the President of the Commission directly elected by the people. That would give the President a democratic legitimacy equal to, or greater than, that of individual governments. Unfortunately, such a European Presidential Election is not likely to be agreed to in the medium term, even though it would get over problems of the democratic legitimacy of the Commission.
“A variant of this approach might be to give more power to the European Parliament. The Parliament could be given more power either in relation to the appointment of the Commission or in relation to the implementation of the Stability and Growth Pact. I’m not sure that this would work because I do not feel that the public, in each European country, identifies emotionally with the European Parliament to an extent that would mean that the enhancement of its power overcomes the ‘democratic legitimacy gap’.

“Another approach, which has a better prospect of short-term success, is to involve national parliaments much more intimately in the process of drawing up the Commission’s recommendations in respect of each country under the Stability and Growth Pact. This approach would mean that the Commission would be enabled to co-opt opposition parties and backbenchers in National Parliaments in support of its efforts to ensure that the disciplines of the Pact are respected.

“If, for example, an opposition party Finance spokesperson was privy, at a very early stage, to the emerging concerns in the Commission about the viability of the Government’s budget figures, this would serve as a very effective discipline on the Government. It would mean that the Government would have to produce genuine figures because the opposition would be able to cite the authority of the Commission for accusations that it might make if the figures were not genuine.

“Putting such an approach into effect should be considered as part of a reform of the Pact. A requirement to make available to the finance committees of member states, either publicly or confidentially, drafts of Commission advice to member governments, would go a long way towards harnessing the democratic legitimacy of member state parliaments in support of the Stability and Growth Pact.

“Such an approach would be consistent, in spirit, with the provisions of the Draft Constitutional Treaty. This Constitutional Treaty provides for member state parliaments to be much more involved than before in the early stages of the processing of all future EU legislation. It would be consistent with this also to involve member state parliaments in the early stages of the framing of Commission recommendations under the Stability and Growth Pact.?

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