Saving Social Europe: Going Beyond The EU’s “Governing By The Rules And Ruling By The Numbers”

Please see my recent op-ed for Social Europe Journal on the continued travails of the Eurozone crisis, with suggestions on how to go beyond the EU’s “governing by the rules and ruling by the numbers.”

During the euro’s sovereign debt crisis, European leaders have been obsessed with rules, numbers, and pacts, including the so-called ‘Six-Pack,’ the ‘Two-Pack,’ and the ‘Fiscal Compact,’ each more stringent on the nature of the rules, more restrictive with regard to the numbers, and more punitive for member-states that failed to meet the requirements. In the absence of any deeper political or economic integration, the EU ended up with ‘governing by the rules’ and ‘ruling by the numbers’ in the Eurozone. Austerity policies focused on rapid deficit reduction along with pressures for structural reform – often shorthand for reducing labor rights and protections – have wreaked havoc on ‘Social Europe,’ in particular in countries in the periphery.

Slowly but surely, however, under pressure from deteriorating economies and increasing political volatility, EU leaders have been changing the rules by which they have been governing the economy. But they have not done this formally. Instead, EU leaders have been informally and incrementally reinterpreting the rules without admitting it in their discourse to the public. This has helped to slow the economic crisis but not to end it.

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Presentation on Resilient Liberalism at the United Nations Economic Commission for Latin America and the Caribbean

On October 14, I travelled to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) headquarters in Santiago, Chile, to give a presentation on the “Resilience of neoliberal ideas in Europe and beyond: its causes and its effects on the labor market and the welfare state.” Audio and video of my presentation are available here.

The Beginning of the End or the End of the Beginning for the Stability Rules

The latest skirmish on the budget, as Berlin (and Brussels) try to hold the line on the stability rules, while Paris and Rome push for greater flexibility, is very much a draw.  Hollande and Renzi wanted and needed a very public fight to show their citizens that they have been pressing for less austerity to ensure economic growth, even as they reaffirmed their respect for the rules.  They won by gaining modest concessions that marginally violate the rules on austerity. Merkel also won by ensuring that they too had to make modest concessions toward greater austerity.  This leaves the question:  is this the beginning of the end for the stability rules or is it just the end of the beginning—with wrangling about the rules the new modus operandi? If the latter, Eurozone economies will continue to sink.

Quote appears in the Greek newspaper newspaper Kathimerini on November 6, 2014.

Landscapes of History: Photo Exhibit at Harvard’s Center for European Studies

Vivien_Invite_RGB

Although the reception has already taken place, my photo exhibition remains open for viewing 9 am to 5 pm, Monday through Friday, at the Art Gallery of Harvard’s Center for European Studies, 27 Kirkland Ave, Cambridge Ma 02138.

You can see my other work at http://www.vivienschmidt.com.

Book Discussion of Democracy in Europe: The EU and National Polities online

In a December 2006 discussion on her book, Democracy in Europe: The EU and National Polities, Vivien Schmidt, the Jean Monnet Professor of European Integration at Boston University, offered an explanation of the European Union’s oft-cited “democratic deficit.” In establishing a conceptual framework for her analysis, Schmidt distinguished between two types of governance in European states: simple and compound polities. In simple polities, governing authority is channeled through a single authority while in compound polities it is diffused through multiple authorities. France and the United Kingdom, for example, are simple polities while Germany and Italy are compound. The EU, Schmidt asserted, is a compound polity because it has a composite (national and European) identity and only possesses state-like sovereignty in some policy areas. Trade policy, for example, was cited as an area where shared sovereignty is accepted. When it comes to the Common Foreign and Security Policy, however, this is not the case.

View the discussion on the Woodrow Wilson Center’s YouTube channel.

Comments on French Crisis and Germany’s Role

Here are some comments from Professor Schmidt in response during a recent interview on the role of Germany in the recent restructuring of the French government:

On the role of Germany in the restructuring: It played no direct role, but of course indirectly, Germany does. First, through its ordo-liberal ideas that underpin the Stability and Growth Pact and all the subsequent packs (six pack, two pack) and pacts (fiscal compact), and a discourse that has promoted the ‘Stability Culture,’ and policies focused on austerity and structural reform as the only answer. But why blame only Germany? Its allies include the ECB, that also believes in stability, and has pushed austerity and structural reform as a quid pro quo for its own monetary policies; the Commission, that has only begun to show flexibility very recently; and a variety of member-states worried about a ‘transfer union’ in which the core would have to pay for the periphery. Moreover, France (under Sarkozy) signed up to all of this as well, so Hollande is stuck with it, whether he likes it or not.

That said, Montebourg’s comments about the German obsession with austerity were indeed crucial to his ousting for two reasons. First, he is a Minister in a government in which the President had just announced continued austerity and structural reforms in line with ‘the line’ of the EU. Breaking ranks in this way is never appreciated by any Prime Minister or President of a country. Second, no doubt there were already frictions with the PM, and this was the opportunity to get rid of him. Montebourg may himself have welcomed it, so that he is no longer associated with a President (and government) he plans to run against in the next Presidential elections. But this means that there will be no vocal representatives of the left of the Socialist Party in the government—a problem for Hollande in terms of keeping his party entirely behind him.

Finally, on whether Berlin with change its European policy, the answer is not in the discourse, but possibly in the practice. My sense is that the discourse will continue to focus on ‘staying the course’ of austerity and structural reform, but that the Commission will exercise increasing flexibility in meeting the criteria, and the Council is likely to try to provide some investment to promote growth. I think by now everyone recognizes that these policies are not working, and you can’t just blame the Greeks, the Italians, and the French for it!

If I am asked: will policy change a lot soon? The answer is no. However, policy is likely to shift incrementally over time, in particular if and when the Council itself becomes increasingly represented by social-democratic member-state leaders.

Vivien Schmidt Awarded Research Fellowship

Recently, I was awarded a research fellowship by the European Commission, Directorate General of Economic and Financial Affairs (DG ECFIN).  It involves my producing a paper entitled “The Political Economy of the European Monetary Union: Rebuilding Trust and Support for Economic Integration.”  The fellowship program itself encompasses approximately ten fellows,  all economists except for me (a political scientist).  In addition to writing a very long research paper for publication in DG ECFIN’s paper series, I am to participate in three workshops over the course of a year (june 2014-June 2015), plus be available for 30 hours of consultations.  The fellowship program was established in view of the seating of the newly European Parliament and the newly appointed Commission President and Commissioner head of DG ECFIN.  We are to provide advice to the new Commissioner with regard to current and future policy.  In my own case, I will be considering not just how to rebuild trust and support for economic integration but the problems with the current policies that make rebuilding trust very difficult.

In my research, I will be examining not just problems with the economic policy performance (often termed output legitimacy in EU studies ) and the increasingly volatile politics resulting from citizens’ view of the EU as unresponsive to their concerns (input legitimacy) but also the quality of the governance processes (which I term ‘throughput’ legitimacy).  I will be interviewing of EU officials to get a fuller sense of  the political dynamics of crisis resolution, as EU institutional actors have sought to get beyond the rigidities of the initial crisis response to economic governance that established a set of numbers-targeting rules focused on austerity and structural reform that have not worked.  I will be considering how EU officials in different EU institutions may go about informally reinterpreting such rules as well as how they legitimate any such reinterpretations.

Interview in Corriere della Serra

While in Rome last week, I was interviewed by Lorenzo Salvia for Corriere della Serra. The interview appeared in the print version of the paper on November 26, 2013. [interview Schmidt corriere della sera 26 nov 2013]

Hollande’s Tax Rebels Underscore Mounting Opposition

Hollande is caught between a rock and a hard place.  The rock is the European Commission, which has been pushing him  to reduce deficits significantly.  Having been given a two year extension on the rules that demand a 3% deficit or lower, Hollande has to find the money.  The easiest way to do that, and the fastest, is to raise taxes.  That French taxes are high is not the main problem, despite the fact that they are the highest in the Euro-area.  Like the Scandinavian countries, French citizens get a lot for their money in terms of a high level of public services, including high quality day care and generous allowances for child-care, which have translated into France having one of the highest birth rates in the EU (alongside Sweden).  The problem is that with the economy slowing and unemployment high (esp. youth unemployment), ordinary citizens don’t want to hear of any tax increases, in particular because they see the rich leaving for across-the-border tax havens, such as Belgium, and government officials maintaining their perks.  The hard place, then, is the citizens.  It is all the harder for Hollande, given his popularity ratings, which are the lowest historically for any President of the Fifth Republic, and because he has failed to find a discourse that legitimates his adherence to Eurozone agreed austerity—remember that he pledged ‘growth’ in his presidential campaign—or a strategy that actually could deliver growth.

Link:

Hollande’s Tax Rebels Underscore Mounting Opposition by Gregory Viscusi and Mark Deen (Bloomberg 11/20/13)

 

Resilient Liberalism in Europe’s Political Economy Presentation of the book edited by Vivien Schmidt and Mark Thatcher

Vivien Schmidt and Mark Thatcher introduce Resilient Liberalism in Europe’s Political Economy at the University of Milan:

http://portalevideo.unimi.it/media?mid=333

See also comments by contributor Maurizio Ferrera:

http://portalevideo.unimi.it/media?mid=333&cid=1385&play=true

And by contributor Erik Jones:

http://portalevideo.unimi.it/media?mid=333&cid=1386&play=true