The Council

Chapter 5 discusses the pathway to legitimacy of the European Council (and the Council), with a special focus on Germany’s predominance through “one size fits one” rules. The chapter begins with an analysis of the Council’s particular sources of power and grounds for throughput legitimacy in Eurozone governance. It questions member-state leaders’ assumptions about their representativeness (input legitimacy), then asks if they meet the requirements of deliberative mutual accountability (throughput legitimacy) or even whether Germany fits the criteria expected of a benevolent hegemon. Next the chapter discusses the Janus-faced public perceptions of Council crisis governance. These are divided between views of the Council as an unaccountable (German) dictatorship or as a mutually accountable deliberative body (in the shadow of Germany). This part first presents the Council as an unaccountable dictatorship by detailing the ways in which Germany was predominant on its own and/or in tandem with a weaker France. It then counters with a discussion of the Council as a mutually accountable deliberative body, by charting not only the many instances in which member states agreed with German preferences but also where Germany acquiesced to those of other member states. The chapter ends with an examination of the actions of the Council (in particular the Eurogroup of Finance Ministers) and the Troika (IMF, Commission, and ECB) with regard to the program countries. This can be seen as two sides of the same coin: harsh dictatorship (especially the third Greek bailout) or deliberative authoritarianism (eg, Ireland, Portugal, Cyprus and Greece in the second bailout).

Governing by Rules and Ruling by Numbers in the Eurozone Crisis

Chapter 4 provides an overview of the Eurozone crisis, to serve as a background for the subsequent four chapters which discuss in turn each of the four EU actors’ particular pathways to legitimacy, including their sources of power and grounds for throughput legitimacy, along with the Janus-faced public perceptions of their Eurozone governance. The chapter begins with a brief review of the history of European Monetary Union (EMU), describing the trials and tribulations in the run-up to the Maastricht Treaty and member states’ very different ideas and discourse related to monetary integration, as illustrated by the differences in German, French, and Italian views. It then considers what happened at the time of the introduction of the single currency. The chapter follows with the initial responses to the Eurozone crisis during its fast-burning phase, characterized by a doubling down on the rules of the Stability and Growth Pact. It elaborates on the trials and tribulations at the inception of the crisis, on EU actors’ initial actions and reactions, and on institutional innovations such as banking union. It also provides further details on legislation and treaty agreements, as well as on the ideas underpinning the policy responses. The chapter ends by considering the benefits and drawbacks of EU actors’ subsequent reinterpretation of the rules by stealth during the Eurozone crisis’ slow-burning phase, arguing that although rules reinterpretation may have improved policy responses (output), not admitting this raised questions of accountability and transparency (throughput), while failing to address problems of political legitimacy (input).

Policy Effectiveness and Performance in the Eurozone Crisis

Chapter 9 examines the output legitimacy of Eurozone crisis governance, based in its policy effectiveness and performance. The chapter begins by showing that the crisis was misframed as one of public debt rather than private debt and misdiagnosed as resulting from bad behavior rather than the structure of the euro. The narratives did not reflect the periphery’s pre-crisis low deficits and debt (except for Greece) or account for the impact of competitive wage deflation and current account surpluses in Germany, as well as for bank-spurred wage inflation in the periphery (especially by German and French banks). The chapter then argues that EU actors chose the wrong remedies—budgetary austerity and structural reform instead of growth through stimulus and investment—and failed to devise adequate solutions. This is evidenced by the EU’s lack of effectiveness in monetary policy and investment compared to the US and by the increasing divergence in performance between Northern and Southern Europe. To blame is the failure to complete the architecture of the euro with the necessary economic instruments, not the fact that the Eurozone would never be an Optimum Currency Area (OCA). At fault were equally the excessive socioeconomic costs of austerity, reflected in levels of unemployment, inequality, and poverty, and the perversity of EU-led structural reforms. These “one size fits all” socioeconomic policies failed to take account of differences in national varieties of capitalism and growth models, while taking a tremendous toll on countries under conditionality—not just Greece but also Portugal, Spain, Italy, and even Ireland.

Conceptualizing Legitimacy

Chapter 2 investigates questions of democracy and legitimacy in the EU; defines the three legitimizing mechanisms of output, input, and throughput; and then examines the five main criteria for throughput legitimation—efficacy, accountability, transparency, inclusiveness, and openness. The chapter begins with foundational definitions of legitimacy in liberal democracy based not only on a governing body’s authority but also on its activities. For the latter, it then explores the concepts of input, output, and throughput legitimacy; sets them in historical philosophical perspective; and differentiates them from one another. Lastly, the chapter discusses the different criteria that make up throughput legitimacy, provides examples from EU governance, and discusses their interaction effects. Efficacy is defined in terms of efficiency in policymaking, with illustrations drawn from the challenges EU actors have faced to improve governance processes. Accountability is first defined generally as public officials giving account and being held to account in technical and political forums, and then discussed in terms of EU actors’ accountability and the forums to which they may (or may not) be accountable. Transparency is defined as ensuring citizen access to information about governance policies and processes, with examples of the ways in which EU actors may (or may not) be transparent for good (or bad) reasons. Inclusiveness and openness are defined as EU actors’ willingness to engage with citizens (mainly organized in interest groups) and discussed in terms of their successes or failures to bring in citizens in ways that ensure balance and fairness in representation.

Introduction

Chapter 1 introduces the book by briefly discussing the Eurozone crisis and how it has contributed to Europe’s crisis of legitimacy. The chapter begins by describing EU actors’ initial responses to the Eurozone crisis, focused on “governing by the rules and ruling by the numbers” and characterized by policies of austerity and structural reform. It then discusses such actors’ subsequent shift to reinterpreting the rules “by stealth” in reaction to deteriorating economic performance and growing political discontent. The chapter next connects the problems related to Eurozone policies, politics, and processes to questions of legitimacy. It defines legitimacy in the EU studies terms of input (political legitimacy), output (performance legitimacy), and throughput (procedural legitimacy) and considers how the EU’s institutional context has complicated Eurozone crisis governance. It then sketches out EU actors’ different pathways to legitimacy, related to their differences in power, position, and bases for legitimacy. The chapter ends with a methodological note about the book’s analytic framework of discursive institutionalism, explaining how its focus on ideas and discursive interactions in institutional context provides a useful bridge to considerations of both power and legitimacy.

The European Parliament

Chapter 8 discusses the European Parliament’s pathway to legitimacy, and its transition from having “no size at all” in Eurozone governance to increasing influence. The chapter begins with an analysis of the EP’s sources of power—which were initially very few, given its marginalization in Eurozone governance—and of its growing throughput legitimacy. Although the most input legitimate of EU actors in principle, in practice it has had limited relevance to citizens and has been far removed from them as well as from national parliaments—themselves the biggest losers in Eurozone crisis governance. But the EP’s lack of remit did not stop it from using its input legitimacy to enhance its own procedural exercise of “voice,” deployed increasingly critically to demand accountability from other EU actors. The EP also slowly gained influence as the “go-to” body for other EU actors in search of legitimation via a political accountability forum. The chapter follows with a discussion of the Janus-faced public perceptions of the EP’s role in Eurozone governance, moving from views of the European Parliament as a talking shop increasingly toward its being a potential equal partner. The chapter shows that initially the EP was a talking shop that largely went along with Council and Commission initiatives, in keeping with its minimal powers, but that over time the EP gained increasing powers both formally, through legislation, and informally, in particular as other EU actors turned more and more to the EP for legitimation by giving accounts to an input-legitimate accountability body.

Conclusion How to (Re-)Envision Eurozone Governance

After briefly setting the Eurozone crisis in international context, this Conclusion asks how the EU may move forward, to re-envision Eurozone governance while resolving the EU’s (euro) crisis of legitimacy in ways that ensure greater input, output, and throughput legitimacy. To do so, it recommends reforming Eurozone governance through a more fine-tuned approach to EU-level macroeconomic coordination via more differentiated country-specific targets debated by EU actors. And it proposes decentralizing the administration of the European Semester to ensure a more bottom-up process that is more sensitive to national varieties of capitalism and growth models. Only in so doing, the chapter argues, can there be greater democratic input at both EU and national levels, which could serve to reduce the citizen discontent driving populism. But for this to work, more solidarity mechanisms along with more resources are required not just for the Eurozone but equally across crisis areas, to ensure successful output performance. Finally, the chapter suggests that EU governance itself requires rethinking through more differentiated integration. Rather than a “hard core” moving forward, or Europe “à la carte,” the most effective future integration would be by seeing recognizing the EU as it already is: a “soft core” Europe of clusters of member states in overlapping policy communities, administered by one overall set of institutions.

National “Politics against Policy” in the Eurozone Crisis

Chapter 10 explores the input legitimacy of Eurozone crisis governance as seen through its impact “at the bottom,” on national politics. The chapter first details citizens’ rising Euroskepticism against a background of declining trust in national and EU political institutions, fueled by socioeconomic and sociocultural sources of discontent. But Euroskepticism also stems from a range of other EU-related beliefs and plays out differently as a result of political institutional and geopolitical factors. All such factors help explain the EU’s increasing political polarization and party realignments during the Eurozone crisis, along with the electorate’s crosscutting cleavages of right versus left and open/cosmopolitan versus closed/communitarian. The chapter next charts the fate of mainstream parties during the crisis, first detailing the declining fortunes of center-left and right parties in the periphery, including Ireland, Greece, Spain, and Italy, with the exception of the center left in Portugal. It then considers the fate of such parties in core countries, first in Germany, where the center left has fared worse than Angela Merkel’s center right, and then in France, where center left and right have succumbed to the “critical center” of Emmanuel Macron. The chapter follows by considering the rise of populist parties across Europe, but in particular on the extremes of the right with France’s Marine Le Pen and Italy’s Matteo Salvini, on the extremes of the left with France’s Jean-Luc Mélenchon and Greece’s Alexis Tsipras, and in the “radical center” with Italy’s Beppe Grillo and his successor, Luigi di Maio.

The EU Commission

Chapter 7 discusses the Commission’s pathway to legitimacy, as it moved from a rigid interpretation of the “one size fits all” rules of the European Semester to an increasingly flexible one. The chapter begins by analyzing the Commission’s powers, diminished by the Council’s increase in intergovernmental decision-making but enhanced by its ever-growing oversight responsibilities and discretionary authority, and its quandaries with regard to throughput legitimacy. These stem from the countervailing pressures from Northern Europe calling for more rigid rules application, and from Southern Europe calling for greater flexibility. Such pressures also contributed to Commission politicization, starting with Council appointment of José Manuel Barroso as Commission President in line with his political “color” and culminating with the Spitzenkandidat, Jean-Claude Juncker, and his self-declared “political” Commission. The chapter follows with a discussion of the Janus-faced public perceptions of the Commission in Eurozone crisis governance as “ayatollahs of austerity” or “Ministers of Moderation.” During the fast-burning crisis, the Commission appeared ayatollah-like in its rigid approach to governing by the rules and numbers that it had itself proposed to the Council. But as the crisis slowed, the Commission ministered greater moderation, with the Barroso Commission reinterpreting the rules while denying it, and the Juncker Commission fully admitting to its greater flexibility. The exception was the Commission’s Ayatollah-like stance in the Troika (as the voice of the Eurogroup). The chapter closes with a discussion of the deleterious impact of the European Semester on national sovereignty and democracy, in particular with regard to the Commission’s national budgetary oversight.

The European Central Bank

Chapter 6 discusses the ECB’s pathway to legitimacy, as it moved from following “one size fits none” rules to doing “whatever it takes” in monetary policy. The chapter begins with the ECB’s sources of power, based in its autonomy as a central bank and its leaders’ charismatic qualities, and with its grounds for throughput legitimacy. These largely depend upon ECB accountability to technical forums, since it has minimal formal accountability to political forums (only to the European Parliament), although it has informally increased its accountability through dialogue with political leaders. The chapter follows with a discussion of the Janus-faced public perceptions of the ECB’s governance of the euro during the crisis, split between views of the ECB as hero saving the euro or as ogre imposing austerity and structural reform while railroading countries into programs. As hero, the chapter details ECB President Mario Draghi’s increasingly flexible reinterpretation of his mandate, hid “in plain view” as he transitioned from his predecessor’s “credibility” discourse to a “stability” discourse and from denials of the ECB being a lender of last resort (LOLR) to coming very close to one through quantitative easing (QE). As ogre, the chapter delineates the ways in which ECB President Jean-Claude Trichet coerced vulnerable countries into harsh conditionality programs and Draghi made his active interventions a quid pro quo for austerity and structural reform, as well as the ECB’s initial inefficacy; the continuing orthodoxy of its ideas, especially in contrast to the IMF; and its role in the Troika.