THE FUTURE OF THE EUROPEAN CONSTITUTIONAL ORDER

IN THE CONTEXT OF THE RECENT CRISES AND THE

CONTINUING DEMAND FOR FURTHER INTEGRATION

Author: Elena Petkova

1st August 2013

Queen Mary, University of London

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Table  of  Contents  

ABSTRACT  ..........................................................................................................................................  2  

I.  INTRODUCTION  ............................................................................................................................  3  

II.    EUROPEAN  FINANCIAL  AND  SOVEREIGN  DEBT  CRISES  AS  DRIVERS  OF  

CONSTITUTIONAL  CHANGE  ..........................................................................................................  4  

III.  DIFFERENT  MEANS  OF  ACHIEVING  THE  SAME  ENDS  (VOL.1)  –  GETTING  

CREATIVE  WITH  CURRENT  TREATY  PROVISIONS  AND  THE  RETURN  OF  

INTEGROVERNMENTALISM  ..........................................................................................................  9  A.  USING  EXISTING  TREATY  PROVISIONS  TO  THE  FULLEST  ........................................................................  9  Flexibility  clause  .........................................................................................................................................  10  Enhanced  cooperation  .............................................................................................................................  12  Art  136  TFEU  ................................................................................................................................................  16  

B.  USE  OF  INTERNATIONAL  TREATIES  .........................................................................................................  18  

IV.  DIFFERENT  MEANS  OF  ACHIEVING  THE  SAME  ENDS  (VOL.2)-­‐  TREATY  CHANGE  

OR  NO  TREATY  CHANGE:  THAT  IS  THE  QUESTION  ............................................................  24  A.  FORMAL  REASONS  IN  SUPPORT  AND  AGAINST  TREATY  AMENDMENT  ..............................................  24  Reasons  in  support  .....................................................................................................................................  24  Obstacles  to  treaty  change  .....................................................................................................................  28  

B.  SUBSTANTIVE  REASONS:  A  CASE  STUDY  ON  FISCAL  AND  BANKING  UNION  ....................................  30  C.  REFORM  TREATY  VS.  CONSTITUTIONAL  TREATY  .................................................................................  34  

V.    THE  QUESTION  OF  POPULAR  SUPPORT.  IS  PERSUADING  THE  PUBLIC  THE  

HARDEST  PART  OF  THE  PROCESS?  .........................................................................................  40  

VI.  CONCLUSION  ............................................................................................................................  43  

BIBLIOGRAPHY  ..............................................................................................................................  44  

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Abstract This paper is concerned with the effects of the recent financial and sovereign

debt crises on the constitutional order of the European Union and the

prospects of its future development. Due to the lack of ideas of political

finalité, trying to predict the evolutionary trajectory of a sui-generis entity

such as the Union proves a challenging task. For this reason, the present

research examines in detail three possible paths of effecting reforms aimed

at optimizing the working of the Economic and Monetary Union- i.e. making

full use of existent treaty-based powers of action, reaching agreements on an

intergovernmental basis and changing the EU’s founding Treaties. It will be

argued that the latter constitutes the best option due to its functional and

normative advantages, while at the same time acknowledging its problematic

political and popular appeal.

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I. Introduction The European Union is in turmoil. Its members are faced with difficult policy

decisions, its populations are unsettled by the rise of austerity and its principles and

goals are being questioned now more than ever. With the future of the integration

project on the line, inaction is not an option. The EU has to evolve to survive, but the

means by which this should happen are not as straightforward. This paper sets out to

provide some clarification on this matter by following two main aims- first, to draw

upon the impact of the financial and sovereign debt crises in order to discuss the

suitability of different options for deeper economic integration, and second, to explore

the potential for success of a new EU Treaty. To put the discussion in context, section

II acknowledges the importance of the recent crises in providing motivation for

constitutional change and outlines authoritative proposals for stronger legal

underpinning of measures aiming to bring about a fiscal and banking. Section III

provides a comprehensive evaluation of two methods for effecting reforms- i.e. use of

current treaty provisions and contraction of intergovernmental agreements, which

have both generally been considered easier to implement and have, to some extent,

already been tried for the purposes of crisis-management. Section IV concentrates on

the third possible method of reform, that has been neglected so far, namely- a change

in the founding Treaties of the EU. Rather than simply dismissing it as unrealistic, the

present work engages in an examination of the advantages and limitations of treaty

change and even takes the liberty to make a tentative suggestion regarding the form of

this new founding document. As identified in this section, the prospects of any

proposal for treaty change will be poor unless it manages to persuade the public that it

will bring about essential improvements that will affect their lives in a positive

manner and compensate for the loss of national sovereignty. Section V elaborates

further on the idea that popular support could constitute arguably the greatest obstacle

that any plan for a treaty change has to overcome and provides a number of

recommendations on what can be done to increase its chances of success. Ultimately,

this paper concedes that it is not based on a grand ambition of persuading its reader

that reform of the EU Treaties is the only possibility of addressing the challenges that

the EU is currently facing, but what it hopes to demonstrate is the functional and

normative superiority of this choice as a measure for furthering the traditional

integration process.

4

II. European financial and sovereign debt crises as drivers

of constitutional change

If asked to comment on the recent history of the EU one would find it difficult to omit

the important role that the 2008 financial crisis played in the shaping of the Union and

its institutional workings. The spread of financial difficulties from the US to the

continent was a new challenge for the integration project, which was until then seen

as constituting a relative success. As the crisis evolved, it became apparent that

Europe was facing its biggest challenge since the Second World War1. This multi-

facetted phenomenon began as a bank crisis and then converted into sovereign debt

crisis, which coupled with lack of adequate action, also provoked a crisis of

confidence. The latter began reinstating the constraining power of national borders,

questioning the Single market and threatening the achievements and as yet unfulfilled

ambitions of the Economic and Monetary Union2. What followed was a bunch of

desperate measures to fight, or at least contain, the devastating effects on the national

economies of certain Member States. At EU level, the crisis revealed some inherent

shortcomings in the architecture of the previously widely-praised Economic and

Monetary Union. A general agreement has been reached over the causes of EMU’s

weakness. They can be summarized in the so-called asymmetry between a centralized

monetary policy and decentralized fiscal and supply-side policies, combined with a

build up of competitiveness imbalances among Member States3. In particular, the

non-observance and lack of respect for the Stability and Growth Pact that embodied

the commonly-agreed set of rules that were essential for the proper functioning of

EMU and the failure to recognize the potential importance of creating a crisis-

management mechanism were important issues that were systematically overlooked in

the years preceding the financial meltdown. These inconsistencies in the economic

governance arrangement of EMU became even more apparent with the start of the

sovereign debt crisis. The sense of urgency suddenly sky-rocketed with the change of

1 Angela Merkel, Speech to the CDU Party Conference, Leipzig, 14th Nov 2011 2 European Commission, Blueprint for Deep and Genuine EMU, 28th Nov 2012, p.10, <http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2012:0777:FIN:EN:PDF> accessed 25th June 2013 3 House of Lords EU Committee Report, The Future of Economic Governance in the EU, 24th March 2011, p.15

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emphasis from private to public sector debt, as the threat for the stability of the

Eurozone became imminent. Setting aside the immediate effects4 that this disastrous

change of economic climate produced, the more indirect systemic consequences for

the European project will be of greater interest for present purposes. The economic

unease provoked questions about the future of the EU, the continuity of the single

currency, the efficiency of Union institutions and last but not least, the doubtful

presence of an integration impulse necessary to see the EU through its difficulties.

These primarily constitutional concerns were exacerbated by the lack of coordinated

action on the Union level, especially in the early stages of the financial crisis when

individual member states were fighting the challenges each on their own. Even when

collective action finally proved unavoidable, it was slow, lacked focus and didn’t

seem to be part of an overarching plan with an agreed direction. With a number of ad

hoc measures5 the Member States managed to patch up the shaky foundations of their

Union. One thing was certain, the crises provided a test for the natural tendency of

Member State governments to abstain from measures of solidarity and to avoid bold

and courageous decisions that could make the EU stronger.6 The latter was reflected

in the absence of common crisis-management framework and the predominance of

“fire-fighting” measures that questioned the usefulness of Union membership in

conditions that differ from prosperity. Rising levels of disillusionment with the

European project became typical of both the public in general and the political leaders

as both groups came to realize that increased interdependence might not be a

justifiable risk when the collateral of economic benefit has been majorly devalued.

Notwithstanding the negative reactions to austerity, the political leaders continued to

push forward with isolated steps aimed at strengthening the economic governance of

the Eurozone and increasing the effectiveness of existent economic cooperation rules

that were adopted on 13th Dec 2011. Prime example was the reform of both the

preventive and corrective arms of the SGP and the introduction of the

Macroeconomic Imbalance Procedure (MIP) that allows for the prevention and

correction of macroeconomic imbalances via EU-level surveillance. The crises also

4 Such as economic instability, distrust of the financial system and social discontent 5 For example, rescue packages, establishment of EFSM and EFSF and temporary programmes by the ECB 6 Jean-Claude Piris, The Future of Europe: Towards a Two-Speed EU? (2012), CUP, p.5

6

brought to the foreground the need for a supervisory framework7 to better protect

European citizens and to rebuild trust in the financial system. The establishment of

the European Stability Mechanism and the signing of the Treaty on Stability,

Coordination and Growth, despite being concluded outside the EU framework, were

also crisis-fueled measures adopted to provide a permanent stability fund and a

tightening of the rules contained in the SGP respectively.

The dynamics of the crises have produced two conflicting ideological positions as

regards the direction of the EU’s future development. On the one hand, the

consequences of the crisis are seen to have created centrifugal forces that highlight the

safeness and resulting appeal of individual (nationalistic) policy-making and are also

pulling public opinion in different member states further apart. On the other hand, the

struggles of the Union are perceived as indicators of the need for deeper

harmonisation and cooperation, with an economic government and a closer political

union being on the opposite extreme of the integration paradigm. Namely this idea

will form the backbone of the present paper by using as evidence the recent proposals

for deepening of European integration in the fiscal and budgetary spheres and

providing suggestions on how those reforms could be accommodated. Of central

importance to this paper’s pro-integrationist premise will be the Blueprint for a deep

and genuine EMU as published by the Commission in October 2012 which provides a

good itinerary of steps, with a number already under way, whilst others predicted to

take a few years to implement. It puts forward the idea that the crisis kick-started a

long-awaited overhaul of EMU but despite the variety of reactionary measures, the

process is far from being complete.

In short, the Blueprint describes three categories of measures necessary to unlock the

full potential of the Economic and Monetary Union. In the short-term (6-18 months),

the Commission believes developments of economic union, such as the introduction

of a new instrument for an ex-ante coordination of major reform projects

(Convergence and Competitiveness Instrument), can take place within the Union’s

current powers. However, medium-term (18 months-5 years) and long-term (beyond 5 7 The supervisory framework consists of the European Systemic Risk Board (ESRB) which is responsible for macro-prudential oversight and the three European Supervisory Authorities (ESAs) that oversee on a micro-prudential level- EBA, EIOPA and ESMA

7

years) measures will necessitate further transfers of competence if proposals for an

EU redemption fund, other measures of solidarity (i.e. “eurobills), an EMU Treasury,

and ultimately, an autonomous euro-area budget, are to materialize. As for measures

of banking union, a Single Supervisory Mechanism is already adopted and a Single

Resolution Mechanism8 is under consideration, but there are doubts as to whether the

establishment of a central resolution authority, if found politically appealing, will find

ground in existing legislation9. The third component of a banking union- a common

deposit protection mechanism - will also inevitably require treaty change.

It is beyond the present author’s expertise and immediate purpose to discuss the

substantive merit or the political appeal of the above integration proposals. Due to the

lack of a clearly defined finalité for economic integration, which is true also for the

EU in general, the measures outlined in the Blueprint will be used as authoritative

guidance10 on what the future may bring in terms of substantive policy changes.

Having this guidance will prove essential when attempting to make the right choice of

procedural tools for bringing about the necessary reforms. In essence, the ends might

be seen to justify the means in this case.

To summarize, the measures undertaken so far in the form of “fire-fighting” or “re-

building” exemplify the potential of the three-partite11 crisis to drive constitutional

change within the EU. Most of them were positioned within the current treaty

parameters, while some resulted from a treaty amendment12 and others had to be

negotiated on an intergovernmental basis13. With proposals for future coordination

centered around the ideas of banking and fiscal union, crisis-management is reaching

8 A political agreement on a Directive on Bank Recovery and Resolution was reached on 27th June 2013, but the idea of an SRM was substituted for a network of national authorities and resolution funds for now. 9 Wolfgang Schauble, “Banking Union Must be Built on Firm Foundations”, Financial Times, 12th May 2013 10 Authoritative because of the Commission’s track record of proposing legislative measures that tend to materialize, albeit with changes and in a more watered-down form. Some of the proposed measures for banking union have been either already adopted (the Single Supervisory Mechanism) or currently undergoing adoption (the Single Resolution Mechanism). 11 As previously discussed there were three types- financial, sovereign debt and confidence crises 12 The ESM was only made possible by the addition of a third paragraph to Art. 136 TFEU 13 The TSCG and ESM Treaty took the form of international treaties.

8

the boundaries of the current Treaties and is increasingly provoking debates about the

appropriate means for effecting those systemic changes. On the basis of careful

evaluation of the advantages and limitations of the different avenues for future

reform, this paper will attempt to sustain the author’s conviction that the best way to

effect extensive budgetary and banking reforms will be by amending the Union’s

founding Treaties.

9

III. Different means of achieving the same ends (vol.1) –

Getting creative with current Treaty provisions and the

return of integrovernmentalism

As discussed in Section 2, the financial, sovereign debt and public confidence crises

acted as catalysts for the surfacing of ideas of deep economic integration that

remained dormant for over a decade following the introduction of EMU in 1992.

Political leaders of today will have to make some important decisions on the extent of

future cooperation and choose the most appropriate way to convey those changes.

This section will examine two proposed routes that have been, to some extent, already

used to address the recent events and comment on their suitability as means for

bringing about these long overdue reforms- one is to remain within the confines of the

current Lisbon Treaty and make full use of its provisions, whilst the other considers

whether the recent proliferation of intergovernmental treaties will present a good

alternative for implementing the needed changes in the future.

A.  Using  existing  Treaty  provisions  to  the  fullest  

 

It is widely acknowledged by EU institutions that only where a move towards a

genuine economic union is not possible within the current framework, but is

indispensible for improving the functioning of EMU, should an amendment to the

Treaties be preferred14. The EU Treaties, as they stand, contain certain mechanisms,

which allow the Union to extend its reach beyond what was explicitly spelled out on

paper by the Member states. These are the so-called “flexibility clause” (Art 352

TFEU), the mechanism of enhanced cooperation (Arts 326-334 TFEU and Art 20

TEU) and the use of Art 136 TFEU as a legal basis for the adoption of secondary

legislation.

14 Blueprint supra n.2, p.14

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Flexibility clause

Art 352 TFEU provides a convenient way of extending the EU’s powers in certain

areas that have already been covered by other treaty provisions without the need for a

formal amendment to the treaty document. Its purpose is to enable the EU to react to

unforeseen circumstances via the establishment of common EU policies 15 . It,

therefore, resembles a suitable “instrument for filling the gaps”16 with any post-crisis

measures that were not anticipated by the current Treaties’ drafters. It is limited,

however, to attaining “one of the objectives set out in the Treaties” for which the

Union has not been expressly conferred power to act. Even though the Lisbon Treaty

extended the potential scope of application of Art 352 TFEU beyond the remit of the

internal market, due to the nature of the proposals for deeper economic and budgetary

reforms, it could be argued that a basis for these reforms may only be found in the

vaguely formulated Art 3 (3) TEU. The latter describes the establishment of the single

market as one of the Union’s aims, but it also refers to the objective of attaining

“sustainable development of Europe based on balanced economic growth and price

stability” as well as the promotion of economic cohesion and solidarity among

Member States. Even if we were to turn a blind eye to the uncertain legal basis in

those wide proclamations, there are a number of additional hurdles that those

proposals will have to jump before they are given a green light under the flexibility

procedure.

First of all, on a purely procedural ground, the proposals would have to overcome the

requirement of unanimity in the Council, be proposed by the Commission and agreed

by the European Parliament, even if they were to follow the special legislative

procedure. It is doubtful that Member States will agree unanimously to such a

significant extension of Union competence based on such a dubious legal provision.

15 Theodore Konstadinides, ‘Drawing the Line Between Circumvention and Gap-Filling: An Exploration of the Conceptual Limits of the Treaty’s Flexibility Clause”, Yearbook of European Law, vol.31, no.1 (2012), pp.227-262, at p. 228 16 Lucia Serena Rossi, “Does the Lisbon Treaty Provide a Clearer Separation of Competences between EU and Member States” in Andrea Biondi, Piet Eeckhout & Stefanie Ripley (eds.), EU Law after Lisbon (2012), OUP, pp.85-106, at p.103

11

Secondly, Art 352(3) TFEU strictly forbids any harmonization of Member States’

laws based on the article if they were excluded from the Treaties in the first place. It

was apparent at the time of establishment of EMU that Member States were reluctant

to part with their economic competence, and that was reiterated in Art 5(1) TFEU,

which indirectly excludes the Union from undertaking any harmonization in the area

by limiting its role to mere issuance of broad guidelines.

Thirdly, even if somehow the proposals for deepening of EMU are deemed suitable to

be legislated via the means of Art 352 TFEU (which is very unlikely), a final nail in

the coffin of this idea will be the controversy that it will create with regards to the

principle of conferral of competence as contained in Art 4(1) TFEU. Due to the

magnitude of the proposed reforms their authorization could only be realized via an

express agreement by the Member States, otherwise the possibility of technocratic

self-empowerment17 of the Council could amount to self-conferral of powers in this

sensitive area. Such unprecedented use of this type of evolutionary clause will be met

with disapproval by the Member States and especially by strong Constitutional Courts

like the German Federal Constitutional Court, which is bound to reiterate the Union’s

lack of Kompetenz-Kompetenz in areas of economic policy. A confirmation for this

can be found in the recent judgment on the Lisbon Treaty18 in which the BVerfG

pointed out that Art 352 is to be construed narrowly and that any developments

concerning European integration should still be “predicted and determined”19

by the national legislative bodies. In practical terms, this creates an implied

“suitability check” on the use of the flexibility clause, which even though not

present as a condition in the Treaties will be applied by inter alia the German

Bundestag20, the Czech Senate21 and the UK Parliament22 before use is made of

17 Jurgen Habermas, The Crisis of the EU: A response (2012), translated by Ciaran Cronin, Polity Press, p.6 18 Case 2 BvE 2/08 Treaty of Lisbon, judgment of 30 June 2009, available in English at: <http://www.bverfg.de/entscheidungen/es20090630_2bve000208en.html> accessed 5th July 2013 19 Ibid. para 322 20 The Federal Constitutional Court believes this has been necessitated by the fact that “the newly worded provision makes it possible to substantially amend Treaty foundations of the European Union” (para. 328, BvE 2/08) 21 Section 119k(d) of Act 107/1999 Coll., as amended by Act 162/2009 Coll. Standing Rules of the Czech Senate

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this so-called “dynamic treaty provision”23. The latter could be interpreted as a

sort of reclamation of the carte blanche that was given to the EU in the 1980s

to shape the internal market. This restriction in the potential use of Art 352

TFEU was highlighted in another case24 regarding the Lisbon Treaty in which

the Czech Constitutional Court denied the use of the flexibility mechanism as a

“blanket norm” for extending the competences of the Union.

As a result, the requirement of formal authorization by national legislatures

comes close to defying the objective of having a flexibility clause since the

level of national scrutiny will be similar to that for a treaty revision. The latter,

coupled with the abovementioned unanimity, places the use of art 352 TFEU at

par with the difficulty in decision-making associated with Art 48 TFEU. It

follows that using the flexibility clause to extend the Union’s powers to

legislate on fiscal and budgetary matters will prove highly controversial and

thus highly unlikely.

Enhanced cooperation

Another possibility of accommodating deeper economic reforms is presented

by the mechanism of enhanced cooperation as “a means of organizing diversity

in an increasingly heterogeneous Europe, while at the same time preserving an

integration dynamic”25. The legal framework for enhanced cooperation is

provided for in Articles 326-334 TFEU and Art 20 TEU which clearly delimit

the scope of application of this tool of differentiated integration. Most

importantly, enhanced cooperation can only be used to promote integration in 22 Section 8 of the European Union Act 2011 provides for the consent of the UK Parliament prior to the adoption of a draft measure based on Art 352 TFEU. 23 Supra n.18, para 239 24 Case Pl ÚS 19/08 Treaty of Lisbon I, judgment of 26 Nov. 2008, para 150 et seq.; available in English at: <http://www.usoud.cz/en/decisions/?tx_ttnews%5Btt_news%5D=484&cHash=621d8068f5e20ecadd84e0bae0527552> accessed 6th July 2013 25Françoise de La Serre & Helen Wallace, “Flexibility and Enhanced Cooperation in the EU: Placebo rather than a Panacea?” (1997), Research Policy Paper 2, Notre Europe, p.5

13

areas that do not fall under the Union’s exclusive competence26 and it should

only be deployed to further the objectives of the Union, to protect its interests

and reinforce its integration process. Economic policy as such is not an

exclusive Union policy, which reveals its potential to be subject to enhanced

cooperation and, arguably, to be seen as furthering the objectives of the EU by

strengthening the economic arm of EMU and providing stability for the single

market. However, the interrelation between economic and monetary policy

could prove challenging as changes in one could have indirect consequences on

the other. If we were to follow functionalist logic, the creation of a European

fiscal and budgetary policy would result in spillovers into monetary policy and

the single market due to the central role of the single currency. This was

foreseen to an extent by Art 10 TSCG, which provided for the use of enhanced

fiscal cooperation but “without undermining the internal market”.27

Another characteristic of the mechanism of enhanced cooperation is that it

should only be utilized as an instrument of last resort in cases where the same

objectives cannot be attained within a reasonable period of time by the Union

as a whole28. This is particularly important in our scenario, as economic

convergence policies have been known to be deeply divisive due to their

assumed belonging to spheres of national sovereignty. It might be the case that

not all member states would want to proceed with a fiscal and banking union as

outlined by the Commission’s Blueprint, which would imply that only a group

of them will converge on this occasion with the door left open for future

joiners. This will be in line with the two most successful instances of enhanced

cooperation within the EU framework so far- EMU and Schengen, which are

both examples of “in-built”29 closer cooperation, the arrangements for which

were laid down in the Treaties themselves instead of following the general

26 Exclusive areas of competence are listed in Art 3(1) (a-e) TFEU. 27 Art 10, Treaty on Stability, Coordination and Growth, available at: <http://www.consilium.europa.eu/media/1478399/07_-_tscg.en12.pdf> accessed 12th July 2013 28 Art 20(2) TEU 29 Piris supra n.6, p.71

14

enhanced cooperation legal regime. Since no specific arrangements were made

for a future banking Union or budgetary measures that go beyond coordination,

any potential developments in these sectors will have to follow the rules in Arts

326-334 TFEU.

Notably, enhanced cooperation has exceptional value as a tool for political

compromise as it ensures at the same time unity and diversity30. An obvious

advantage is that it presents a good alternative to the time-consuming and

laborious treaty amendment process. That said, it is important to underline that

any request for enhanced cooperation would still need to comply with certain

requirements, such as the minimum membership of 9 Member States and the

receipt of authorization to proceed by the Council only following a proposal

from the Commission and after obtaining consent from the Parliament31.

As well as its advantages, however, this method of policy development brings

certain risks. Firstly, the very fact that it does not involve all Union Member

States hints to the fragmentation of the European project and the potential

distancing from the original goal of European unification32. In other words, it

increases the differentiation within the legal body of the EU, which, with

extended use, could lead to the loss of European identity and disturbance of

internal coherence33. It can be argued, therefore, that adopting a fiscal and

banking union via the means of an enhanced cooperation could result in the

worsening of the current polemic on the creation of a two-speed (or to be more

specific, multi-speed34) Europe. The idea of multi-speed Europe has at its heart

the varying composition of the closer cooperating group compared to earlier

such measures, with Euro area member states expected to participate, while

30 Giuseppe Martinico, “The Euro Area Crisis: A First Legal Analysis”(2011), Perspectives on Federalism, vol.3, issue 3, p.5 31 Art 329 TFEU 32 Jan-Emmanuel de Neve, “The European Onion? How Differentiated Integration is Reshaping the EU”(2007), European Integration, vol.29, No.4, pp.503-521, at p.505 33 Joschka Fisher, “From Confederacy to Federation: Thoughts on the Finality of European Integration”, Speech at the Humboldt University, Berlin, 12th May 2000 34 Piris, supra n.6, p.61

15

Eurosceptic member states such as the UK, Denmark and the Czech Republic

withholding their participation in such an exercise. That encourages the

emergence of several circles of enhanced cooperation, which is likely to

require some adjustment in institutional arrangements, and will bring about

decreased transparency and comprehensibility35 of the EU order.

Even though enhanced cooperation may appropriately reflect the difference in

integration needs between a monetary union in trouble and a wider club of

countries primarily interested in free trade36, it will create a culture of double

standards where the “outs” are likely to share a sense of paranoia that their

interests will not be protected if they are not part of the decision-making

process37. A recent case of crisis-related enhanced cooperation measure that

was badly received by certain Member States, among which the UK, the Czech

Republic, Luxembourg and Malta, was the proposal for an EU-wide Financial

Transactions Tax aimed at ensuring that the financial sector contributes its

share to the cost of the crisis. Despite the fact that the minimum criteria for

enhanced cooperation were satisfied and the proposal was adopted in January

2013, supported by no less than 11 Member States, it generated a lot of

hostility from non-participants. In fact, the UK launched a legal challenge in

April 2013, following a letter38 of concern submitted by the House of Lords

European Union Committee, which expressed worries about the extraterritorial

impact of the FTT and the resulting expenses on non-participating Member

States. Depending on the outcome of this case, the practical value of the

mechanism of enhanced cooperation might experience a potential drop, as

Member States willing to cooperate in the future would fear that their cause

would be undermined by challenges from opposing governments.

35 La Serre & Wallace, supra n.25, p.15 36 Wolfgang Munchau, “What saves the euro will kill the Union”, Financial Times, 30th Oct 2011 37 Despite the fact that Art 327 TFEU seeks to ensure that any enhanced cooperation respects the competences and, rights and obligations of non-participating Member States. 38 Full text of the letter available at: <http://www.parliament.uk/documents/lords-committees/eu-sub-com-a/FTTEnhancedScrutiny/260313FTT.pdf> accessed 14th July 2013

16

Lastly, an important limitation of enhanced cooperation is the fact that any acts

adopted within its framework remain binding only on the participants and do

not become a part of the acquis communitaire. Therefore, arrangements made

for a fiscal and banking union between, say, Euro-area member states, would

not be part of the legal order that countries joining the EU will have to agree to,

which could potentially lead to further difficulties in reaching an agreement

further down the line. Bearing in mind that all current39 and future non-

Eurozone member states are, according to the Treaties, expected to accede to

EMU and adopt the single currency at some point, relegating such an important

integration step to the status of enhanced cooperation will defy the logic of

unification.

For all the above reasons, enhanced cooperation does not present the most

appropriate choice for implementing reforms in fiscal and budgetary

integration. It would be simply a half-baked solution that would only bind the

participating Member States while triggering the suspicion of the rest as to

whether their interests will be compromised.

Art 136 TFEU

A third possibility for introducing reforms to “ensure the proper functioning of

EMU”40 from within the existing treaty architecture is the deployment of the

residual power that was given to the Council within the text of the Lisbon

Treaty41. Art 136 TFEU was intended to provide a sort of enhanced cooperation

between the euro area Member States by allowing for easier decision-making

during which only those member states will be entitled to vote in the Council

using QMV. Bearing in mind the “extremely wide”42 scope of the provision, it

can be argued that it has the potential to be the legal basis for the enactment of

39 With the exception of the UK and Denmark, both with derogations. 40 Art 136(1) TFEU 41 The essence of Art 136 TFEU first appeared in Art III-194 of the ill-fated Constitutional Treaty. 42 Piris supra n.6 p.107

17

wide-ranging provisions concerning the Eurozone43. In theory, it is possible to

use this empowering clause for purposes of strengthening budgetary

coordination and surveillance, as well as for setting out of economic policy

guidelines for the EU 1744. In fact, Art 136 TFEU was used on a number of

occasions since the start of Europe’s crises. To briefly mention but a few, it

was used by the Council in 2010, together with Art 126(9) TFEU, to address

the dire situation in Greece45 and in 2011 became the legal basis for the ESM46.

Its use in combination with measures for multilateral surveillance was also

justified for the adoption of sanction-based procedures47 and the introduction of

reverse QMV within those procedures that formed part of both the preventive

and corrective arms of the SGP as reformed in 2011. Most recently, it played a

central role in the enactment of the “two-pack”48 measures for enhanced

monitoring and surveillance in the euro area.

When compared with the previous two in-treaty options, Art 136 TFEU has the

advantage of providing measures authorized by it with the status of secondary

EU law and thus of belonging to the EU acquis, unlike those under regular

enhanced cooperation, while at the same time its authorizing ability does not

stretch as far as that of Art 352 TFEU as no new powers can be conferred on

the EU outside the confines of EMU49. With respect to future reforms, the

usefulness of Art 136 for deepening the integration of the euro area will depend

on how bold the proposals for reform are. The Commission50 has already

acknowledged its value for the potential establishments, such as the 43 As long as they fall within the procedures of Arts 121 and 126 TFEU (with the exception of Art 126(14)) 44 Soon to be 18, with Latvia joining the Eurozone in 2014 45 Decision of the Council 2010/320/EU of 8th June 2010, and all subsequent decisions amending it 46 Decision of the Council 2011/ 199/EU of 25th March 2011 47 Excessive Deficit Procedure (EDP), Macroeconomic Imbalances Procedure (MIP) and Medium Term Budgetary Objective Procedure (MTO) 48 Regulation 472/2013 and Regulation 473/2013 of 21st May 2013 49 It has been suitably dubbed “Eurozone flexibility clause” by Thomas Beukers in “The Eurozone Crisis and the Legitimacy of Differentiated Integration”, in Bruno de Witte, Adrienne Héritier & Alexander H. Trechsel(eds.), The Euro Crisis and the State of European Democracy (2013), EUI e-book, p.12 50 Blueprint supra n.2, p.23

18

Convergence and Competitiveness Instrument (CCI), a new mechanism for ex-

ante reform coordination as part of MIP.

On the other hand, using Art 136 TFEU could also have its limitations. Even

though it provides for easier decision-making in the Council, proposals for any

measures based on it will still have to come from the Commission and receive

the consent of the European Parliament, where the representatives of all 28

Member States will be entitled to a vote51. If extensively used, Art 136 could

provoke legitimacy concerns over certain sensitive provisions that some

Eurozone states might oppose, but be outvoted in the Council52. Overstretching

the scope of the article could also pose a threat to the principle of conferral of

powers to the EU53, similar to those associated with the use of the flexibility

clause.

Finally, because it is a form of differentiated integration, any measure adopted

on the basis of Art 136 will inevitably widen the divide between the

participating Eurozone Member states and those with derogation and contribute

to the complication of the EU legal framework by developing a second layer of

closer cooperation within the already exclusive EMU. All in all, Art 136 TFEU

might be sufficient as a legal basis for some secondary legislation measures

that come within the limits prescribed for its application, but will most

certainly not be enough to affect a major change towards a fiscal and banking

union without raising questions of legality.

B.  Use  of  international  treaties  

Recent developments have demonstrated that EU Member States with the necessary

determination to implement measures of closer economic coordination are willing to

do so even if it means foregoing the established supranational route and returning to

51 Piris supra n.6, p. 108 52 For instance, France was opposed to the introduction of semi-automatic sanctioning or reverse QMV in the Excessive Deficit Procedure. 53 Beukers supra n.49, p.15

19

the basics of intergovernmentalism. Two international treaties were signed since the

start of the financial crisis, both of variable membership but with the goal of

correcting the weaknesses revealed by the insufficiently developed EMU. The Treaty

Establishing the European Stability Mechanism (ESM Treaty) was concluded after an

amendment54 was made to Art 136 TFEU to authorize Member States (and not the

Union) to take measures to safeguard the stability of the euro area as a whole by

establishing a permanent rescue fund. The ESM Treaty was signed between the

Eurozone member states only and as such represents a form of enhanced cooperation

outside the EU framework. The Treaty on Stability, Coordination and Governance

(TSCG), on the other hand, was an attempt to build upon the rules of the updated

Eurozone budgetary discipline code, the SGP, by enhancing both its preventive and

corrective arms and conferring an obligation to incorporate the provisions of the

Treaty in national legislation “of binding force and permanent character, preferably

constitutional, or otherwise guaranteed to be fully respected and adhered to

throughout the national budgetary process”.

Both treaties presented an escape route from the constitutional impasse that the Union

was experiencing. The ESM Treaty was a good alternative to changing the founding

Treaties in order to create a basis for a permanent55 stability fund, as the German

Chancellor insisted on in 2010, while the TSCG was pursued as a response to the UK

veto on any revision of the economic governance rules of the Union that would not

provide the safeguards that Westminster wanted for its financial sector. It appears,

therefore, that intergovernmental agreements can be used to further Union interests,

perhaps to the point that they actually aid supranational integration, rather than

frustrate it56.

54 Decision 2011/199/EU adopted by the European Council on 25 March 2011 55 The two emergency stability funds- EFSF and EFSM were based on Art 122 (2) TFEU that only allowed temporary financial support and the establishment of a permanent stability fund was precluded by the no-bailout clause in Art 125 TFEU. 56 Steve Peers, “Towards a new form of EU law? The use of EU institutions outside the EU legal framework”, European Constitutional Law Review, 2013, vol.9, issue.1, pp.37-72, p.72

20

Despite the obvious advantages of speed and sidestepping unanimity requirements57,

international treaties present a number of restrictions in the context of the attainment

of a deep and genuine EMU. First of all, any agreement between the Member States

that purports to affect the EU legal order will have to be compatible with the principle

of loyal cooperation contained in Art 4(3) TEU. Even though Member States may be

entitled to agree on measures of budgetary and fiscal policy that the Union has not

legislated on, such an agreement has to be compatible with the goals of the EU. This

was clarified in the recent case of Pringle58, where the CJEU reiterated that Member

States are free to partake in international agreements as long as they remain compliant

with their long-standing obligations under EU law.

Second, in case that any new intergovernmental treaty confers a role on a Union

institution59, that role is likely to be subject to fierce scrutiny. Even at present, the

issue of using Union institutions for the purposes of upholding external agreements is

controversial. Formally speaking, the institutions of the Union can only operate within

the powers conferred on them in the Treaties60 and should aim to serve the interests of

the Union, of its citizens and of the Member States, while upholding the consistency,

effectiveness and continuity of Union policies and actions61. Authors such as Peers

draw the line of acceptability of such “task extension” at the use of Union institutions

for treaties whose subject matter does not fall within the EU’s exclusive

competences62 and where those institutions’ essential role has not been altered.63 In

other words, EU non-judicial institutions cannot be vested with powers that would

give them discretion to adopt binding decisions that would go beyond what their

formal role entails in a particular policy64. In the case of judicial institutions, the ECJ

has a generic competence to rule on disputes between member states, which relate to

57 Both the TSCG and ESM Treaties are to enter into force following ratification by 12 Eurozone Member States and 90% of participants, respectively. 58 Case C-370/12, Thomas Pringle v Government of Ireland, 27th Nov 2012 59 For instance, if within the remit of a hypothetical fiscal agreement, the Commission was to be given powers of a Eurozone Treasury. 60 Art 13(2) TEU 61 Art 13(1) TEU 62 Peers supra n. 56, p.48 63 Peers supra n. 56, p.50 64 This was confirmed in Pringle at para 158

21

the subject matter of the Treaties 65 and to ensure the valid interpretation and

observance of EU law with regards to the international agreements between member

states66. The debate on the legitimacy of use of EU institutions by international

agreements was recently re-ignited with the UK feeling strongly against such high-

jacking for the purposes of the TSCG and claiming (perhaps quite rightly) that the

Union institutions were created to serve all member states, not only a group of them67.

A third criticism of the use of international treaties for deepening the Economic and

Monetary Union is largely formalistic and relates to the so-called mutation of the

European project. It concerns the change in the tools for cooperation between the

Members of the Union. Traditionally, cooperation has been effected within the

framework of the founding Treaties and secondary legislation via supranational

policy-making, which has benefited from relatively good levels of democratic

legitimacy due to developed mechanisms of accountability and enforcement.

Intergovernmental cooperation, on the other hand, usually means the absence of EU

decision-making procedure, the absence of control by the Commission and the ECJ on

the implementation by the participating MSs and the absence of sanctions68. Even

though it has been demonstrated that all of these are not necessarily true69, it is still

possible to argue that due to the potential overlap between Union provisions and

intergovernmental agreements, there will be a chance of “contamination”70 of EU

institutions with intergovernmental processes and the resulting reduction of the levels

of parliamentary and judicial control for certain areas of coordination. Transparency

will become problematic should there be a proliferation of intergovernmental

agreements that concern economic integration, as was demonstrated by the TSCG71.

The latter also provided evidence that such a fragmentation of the integration process

65 Art 273 TFEU states: “the Court of Justice shall have jurisdiction in any dispute between Member States which relates to the subject matter of the Treaties if the dispute is submitted to it under a special agreement between the parties” 66Pringle supra n.58, paras 80-81 67 It should be noted that the UK eventually agreed to this extension of powers of the Union institutions, despite openly expressing doubts about its lawfulness. 68 Piris supra n.6, p.117 69 With the TSCG giving de facto surveillance control to the Commission and allowing for the CJEU to enforce budgetary rules and impose sanctions 70 Peers supra n.56, p.41 71 It can be argued that the TSCG made a de facto amendment to primary EU law despite the lack of approval by all MSs (see Peers supra n.56, p.38)

22

will suffer from poor democratic openness and legitimation due to the increase

sidelining of the European Parliament.

Fourthly, the willingness of the signatories to both the ESM and TSCG Treaty to

incorporate the terms of their agreements into the EU Treaties is puzzling. If the

cooperating group could not secure unanimity for a Treaty revision in the first place,

what is to say that they will be able to in the next five years? If anything, the

abstaining Member States will be even more unwilling to engage in Treaty

amendment to simply insert an existent set of rules that they weren’t given the option

of debating and voting on. In case that the Treaty amendment becomes necessary for a

different reason and the accommodation of the ESM and TSCG provisions are only

ancillary, it is very likely that pressure will be applied on the non-participants to agree

due to the uneven split of 25/272 in the case of TSCG or alternatively, they could

attempt to negotiate an opt-out. Another issue will be the dubious democratic value of

an “alien” piece of legislation that did not go through the ordinary treaty revision

procedure but was instead conceived to further the interests of only part, albeit a

majority in the case of TSCG, of the EU Member States. Taking into account past

incorporations, such as the Treaty of Prum, it would appear that chances of success

are higher if the “outs” are kept constantly informed and involved73, but the all-

important variable of political willingness will retain its strong position.

Lastly, an unwanted consequence of the diversion of economic policy-making via an

intergovernmental channel will be the marginalization of the EU as a means of

cooperation. Although in the short term, intergovernmental treaties might be easier to

agree and quicker to implement, especially when time is of the essence, as it was in

the case of the worsening Eurozone crisis, the long-term implications of this

weakening of the Community method will certainly prove erosive of the relevance

and image of the EU as facilitator of inter-state cooperation and agent of prosperity. 72 Croatia, as the newest member of the EU, will (at least until it decides to sign up to it) not be a signatory to the TSCG, so perhaps the number of non-participating Member states will increase to 3. 73 Janis Emmanouilidis, “Which lessons to draw from the past and current differentiated integration?” in Challenges of Multi-tier Governance in the EU: Workshop, Outlines of Presentations, 4th Oct 2012, p. 11 available at: <http://www.europarl.europa.eu/document/activities/cont/201210/20121003ATT52863/20121003ATT52863EN.pdf> accessed 8th July 2013

23

The shifting of discussions to “outside channels”74 is also bound to exacerbate the

divide between Eurozone and non-Eurozone Member states, or in cases such as the

TSCG, where even non-Eurozone members signed the agreement, the divide between

signatories of the new agreement and those who abstained from joining. Much like

with enhanced cooperation, the result will be increased differentiation and the

creation of a two-class order, where the non-participating Member states will become

more and more frustrated at their lack of voice on matters that can have a potential

impact on them in the future.

For all the above reasons the present author believes that using intergovernmental

treaties to perfect the weakness of EMU, as revealed by the financial and sovereign

debt crises, will be unsuitable. Economic and Monetary Union has been an aim of the

EU since the inception of the idea in the Werner Report in 196975. Its eventual

realization with the Maastricht Treaty brought about an asymmetric project, with a

well-developed monetary arm and an overlooked economic one. It would be totally

inappropriate to try and even out this asymmetry by externalizing policy-making. It

will result in a complex myriad of provisions that will be inherently related to one

another, but not forming part of a single-hearted attempt at improving the wellbeing

of the citizens of the EU. The following section will direct attention to a method of

policy reform, which will present arguably the best bet for a determined move

towards deepening of economic union, despite being the least politically desirable.

74 House of Lords European Union Committee Report, The Euro Area Crisis, 14th February 2012, p.39 75 It took four attempts to create EMU- new plans were put forward roughly every 10 years from 1969 until its eventual adoption in 1999. For more historical details, see: <http://ec.europa.eu/economy_finance/emu_history/history/part_a_2.htm >

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IV. Different means of achieving the same ends (vol.2)-

Treaty change or no Treaty change: that is the question

Upon the initiation of the ratification process of the Lisbon Treaty the Council

proclaimed that it will provide the Union with a “stable and lasting institutional

framework” that will be requiring “no change in the foreseeable future”76. Taking into

consideration the instrumental role of the financial and sovereign debt crises, as

discussed in Section II, and the limited suitability of alternative options for progress

explored in Section III, the present section will consider the option of treaty change

and attempt to provide evidence to support its necessity, outline the main difficulties

associated with this idea and also make some suggestions as to the form the new

Treaty should take. Before moving on to discuss some formal justifications of this

choice of action, an important qualification must be made- namely, that the discussion

of advantages and disadvantages of treaty change is in no way exhaustive, but at best

selective. This is particularly true for section B, which concentrates on the proposals

for fiscal and banking union as a justification for preferring a change of the EU’s

founding documents.

A.  Formal  reasons  in  support  and  against  treaty  amendment  

Reasons in support

The first formal justification that can be put forward in support of the need for treaty

change is the unsettling complexity of the existing constitutional provisions.

Currently, the system of EU competences is spread between two founding Treaties

and a long list of annexes and protocols, which make a cumbersome whole. The need

to respond to market pressure in recent years resulted in the piling of texts and the

creation of a complex system of EU secondary law, international treaties and soft law

76 Presidency conclusions, Council of the EU, 14th Dec 2007, 16616/1/07 REV, p.2

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political agreements77. The result was a perceived need for a comprehensive overhaul

of the Treaties to reduce the number of primary legal instruments as much as

possible78, which could be done by the merging of the TEU, TFEU and their

accompanying protocols in a single text. Such a step would reduce repetition and

eliminate duplication79, by removing the need for two preambles, for example. A

subsequent re-shuffling and combining80 of articles that concern the same areas81 will

introduce order and encourage ease of use. New provisions on economic governance

should be positioned along with existent EMU legal framework (currently in Title

VIII of TFEU). A relevant criticism, as raised in the case of the Constitutional Treaty,

might be that it will result in a very long and unreadable82 document. In response to

such criticisms the present author would suggest the incorporation of the essence of

certain protocols and annexes within the relevant treaty articles of the new Treaty,

which would significantly decrease the volume of the final Treaty document. By

doing so, the new Treaty could potentially consist of no more than 250 pages83, which

is still rather long but arguably more in line with the size of constitutional documents

of some of the constituent Member States84.

Second, revision of the treaties has been put on the agenda of European policy-makers

on a number of occasions in the six years since the signing of the Lisbon Treaty. One

example is the protocol85 giving legally binding political “guarantees” to Ireland in

77 Rosa Lastra & Jean-Victor Louis, “European Economic and Monetary Union: History, Trends and Prospects” (2013), Yearbook of European Law, SSRN 136/2013, pp.1-150, at p.140 78 Steve Peers, “The Future of EU Treaty Amendments” (2012), Yearbook of European Law, vol. 31, issue 1, pp. 17-111, p. 100 79 Andrew Duff, A Fundamental Law of the European Union, Speech to the Federal Trust, London, 10 Jan 2013, PDF available at: <http://www.fedtrust.co.uk/filepool/Andrew_Duff_Speech_10thJanuary2013.pdf> accessed 20th July 2013 80 Ibid. 81 For example, bring together Title V of TEU and Part V of TFEU as both relate to foreign policy cooperation or uniting the provisions of enhanced cooperation in Articles 326-334 TFEU and Art 20 TEU. 82 Peers supra n.78, p.100 83 The actual content (articles) of the Treaty Establishing the Constitutional for Europe was to be found in the first 200 pages of the document with the remaining over 250 pages consisting of various protocols and declarations. 84 For instance, the German Constitution, which contains 140 pages. 85 Protocol on the Concerns of the Irish People on the Treaty of Lisbon, OJEU 60, p. 131, 2nd March 2013

26

the course of the adoption of the Lisbon Treaty86. During the same tense ratification

period the Irish managed to secure another concession in the form of de facto

repealing Art 17(5) TEU, which provided for the reduction of the number of

Commissioners from 1 Nov 2014. Assurances were given to the Irish government that

the “one Commissioner per Member State” rule will remain in place, but no formal

action has been taken to amend the Treaty yet. Similarly, an arrangement was made

extending the application of Protocol 30 on the application of the Charter of

Fundamental Rights of the EU to the Czech Republic87. In the context of EMU, the

provisions of both intergovernmental treaties- ESM Treaty and Fiscal Compact- will

need to be incorporated within EU law with the next EU Treaty revision.

Furthermore, Art 16 of the Fiscal Compact explicitly provides a timeframe of five

years within which that incorporation should take place, which pre-supposes that

there will be another amendment of the Treaties by 2017. Most recently, the European

Commission voiced its support for an amendment in the following lines: “The Euro

area is a product of the Treaties. Its deepening should be done within the Treaties, so

as to avoid any fragmentation of the legal framework, which would weaken the Union

and question the paramount importance of EU law for the dynamics of integration”88.

Flowing from this, a fourth reason in support of a Treaty change is that it will reflect

the evolutionary nature of the integration process via the continuing use of the so-

called Community method, which consists of the pooling of national sovereignty and

empowerment of supranational institutions to advance and give effect to joint

solutions89. It is possible to assume that measures will be more authoritative, with

greater political resonance and more effective if taken on the Union level because

there will be a larger authority behind them which will make compliance easier to

observe and sustain. In practice, this claim has already been undermined in the past by

the German and French non-observance of the SGP rules in 2003. There is hope,

86 It should be noted, however, that this was recently annexed to the TEU and TFEU with the accession Treaty of Croatia. 87 See Annex I of the 2009 European Council Conclusions, available at: <http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/110889.pdf> 88 Blueprint supra n.2, p. 13 89 Andrew Duff, Federal Union Now, September 2011, p.3, PDF available at: <http://andrewduff.eu/en/article/2011/509160/federal-union-now-new-publication-by-andrew-duff > accessed 20th July 2013

27

however, that with increasing de-politization of enforcement mechanisms90 for EU

policies the above assertion might become more realistic.

Fifthly, amending the Treaties to reflect the changes necessary to strengthen EMU

will mean the observance of the conferral of powers principle, which is going to make

the process more democratic and legitimate. Such amendment will also settle the

uncomfortable tension between national parliaments and the Union that has resulted

from the EU gradually entering the unchartered territory of fiscal and budgetary

governance. A clear competence transfer would avoid complaints similar to the

German Bundestag’s protestations about its sidelining on the transfer of emergency

support funds within the EFSF91 or the potential controversy surrounding the new

budgetary surveillance procedure within the European Semester during which the

proposed budgets of Member states are evaluated before they have been submitted to

national parliaments.

A final formal justification lies in the need to reform the current treaty revision

procedure to make it more effective for a Union of 28 Member States. The current

“double” 92 unanimity requirement of Art 48(4) TEU is unjustifiably rigid and

discourages treaty amendment discourse due to the difficulty of reaching a consensus

between a large number of participants with varying interests. There have been calls

for relaxation of this requirement by substituting it with some sort of majoritarian

ratification rule that would allow a treaty to enter into force once, for example, four-

fifths of its signatories have successfully ratified it 93 . Recent cases of such

majoritarian ratification clauses can be found in the Fiscal Compact Treaty and the

ESM treaty- 12 Eurozone Member States94 and 90% of all signatories95, respectively.

90 The flaw in the corrective arm of the SGP was remedied by the introduction of the Reverse Qualified Majority Voting for the adoption of sanctions in the content of the Excessive Deficit Procedure. The measure was introduced as part of the Six Pack (more specifically, Regulation No.1174/2011), with its main aim to downplay the political influence that MSs in breach can have in the Council. 91 Although it should be noted that the Bundestag was given a say on future bailout transfers in a decision by the German Federal Court from 7th Sep 2011, 2 BvR 987/10 92 First, unanimity has to be secured by the IGC and then the proposed amendment has to be ratified by all Member states before it enters into force. 93 Duff supra n.79 Fundamental Law of the EU, Speech to the Federal Trust in London, 10th Jan 2013 94 Art 14(2) TSCG

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A step further will be to substitute unanimity for majority voting during the IGC.

Unfortunately, such a revision of the constitutional charter without the unanimous

agreement of the constituent parts of the entity is perceived as a significant mark of

federalism96 that might not prove agreeable for some Member states. In fact, Peers

suggests that such an abolition of national vetoes over Treaty amendment, despite the

obvious boost it might bring to European integration process, would irreparably

damage the EU’s already volatile political legitimacy97.

Obstacles to treaty change

The first, and most obvious, hurdle that needs to be overcome in order to proceed with

treaty change is the requirement of unanimity contained in Art 48 TEU. As discussed

at length above, this rigid requirement fails to capture the political dynamic of an

increasingly heterogeneous EU. Conditioning ratification upon unanimity can act as

an important deterrent for politicians, as they fear their negotiation efforts could be

endangered by a single Member State deciding to withhold its support (potentially for

ulterior motives, as in the case of the UK’s rejection to Treaty amendment for TSCG

reforms). The likelihood of treaty reform, therefore, hinges upon a decisive change in

behavior on the part of political elites98, who should abandon their usual “foot-

dragging” and “fence-sitting”99 approaches to European integration and demonstrate

the needed persistence and determination. It is understandable that a feeling of relief

and reluctance for further reform has settled in, especially following the protracted

gestation of the Lisbon Treaty. Despite this institutional reform fatigue, however,

Member States would have to come to terms with the fact that the text of the current

Treaties is not, and could not possibly be, a definite document carved in stone for

generations to come100.

95 Art 48(1) ESM Treaty 96 Piris supra n.6, p.59 97 Peers, supra n. 78, p. 107 98 Habermas supra n.17, p.51 99 Tanja Borzel, “Pace-setting, Foot-dragging and Fence-sitting: Member State responses to Europeanization” (2002), JCMS vol.40, No.2, pp.193-214 100 Bruno de Witte, “Treaty Revision Procedures after Lisbon” in Biondi et al. supra n. 16 p.107-127, at p.107

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A second disadvantage of treaty change is that it is very likely to result in watering

down of initial policy proposals for the creation of fiscal and banking union and de-

valuing their importance as a result of the “minimum common denominator”

approach that is characteristic of EU policy-making. These are, of course, all

problems stemming from the unanimity requirement, which gives Member States

bargaining power to influence the outcome of negotiations.

Thirdly, a new treaty transferring extensive fiscal competences to the EU will most

certainly attract the attention of activist constitutional courts within the Member

States. As previously discussed, the German Federal Constitutional Court made it

very clear in both its Maastricht Treaty101 and Lisbon Treaty102 judgments that it

retains a degree of oversight over the minimum level of competence that should

remain exclusively sovereign to the Member States and budgetary powers are

certainly an example of such “national sanctuary”.

A fourth, and final, challenge that needs to be overcome in order for a treaty reform to

be successful, is the decline in democratic legitimacy of the EU and the rise in

Eurosceptic movements that point to a popular “disengagement” with the integration

project. This has been exacerbated in recent years by the economic downturn and

measures of austerity that have accompanied the financial and sovereign debt crises.

Bearing in mind the obligation of some Member States to hold referenda to

accommodate reforms within their domestic constitutional traditions and the history

of problematic ratifications in the past103, winning the support of national electorates

will be crucial. It is, therefore, essential for the success of any new treaty reform that

it is substantial104 and sufficiently bold to attract popular backing. The EU must be

seen to address issues that affect the citizens’ every-day lives, so-called salient

issues105. Only then would European electorates be able to accept that further

101 BVerfG, 2 BvR 2134/92 of 12th Oct 1993 102 BVerfG, 2 BvE 2/08 of 30th June 2009 103 Treaty ratification was challenged on five occasions so far: by the Danish Maastricht Treaty referendum in 2002, the Irish Nice Treaty referendum in 2001, the French and Dutch referenda on the Constitutional Treaty in 2005, and the Irish referendum in 2008 on the Lisbon Treaty. 104 Piris supra n.6, p.52 105 Andrew Moravcsik, “In Defence of the Democratic Deficit: Reassessing Legitimacy in the European Union” (2002) JCMS, vol. 40, No.4, pp.603-24

30

centralization will be justified. Due to the central importance of popular support for

the adoption of a new treaty, this topic will be discussed in greater detail in section V

below.

Despite strong formal justifications, it is very unlikely that politicians of today will

approve of the idea of opening up the can of worms that is treaty change without

having a more substantive justification for it. For the present purpose this work will

provide evidence that such justification can be found in the recently revealed need for

deeper economic integration.

B.  Substantive  reasons:  A  case  study  on  Fiscal  and  Banking  Union  

“A new treaty is badly needed to mark the important new stage in European

integration in which the Eurozone is transformed into a fiscal union”106

In the following paragraphs this paper will discuss the insufficiency of competence of

the EU to bring about the necessary harmonization of national economies107, whose

levels of competitiveness are drifting drastically apart, and as a result to efficiently

prevent future crises. As revealed by the recent publication of the Commission’s

Blueprint “ a deep and genuine economic and monetary union can be started under the

current Treaties, but can only be completed with changes in [those] Treaties”. This is

due to the narrow limits of EU economic governance as exposed in the last five years.

During the financial and sovereign debt crises, a crucial “construction flaw”108 of

EMU was brought to the surface- namely, the asymmetry between a centralized

monetary policy and decentralized fiscal policies. This lack of economic government

was left unrectified by treaty amendments following the Maastricht Treaty and

culminated with the revelation of shocking macroeconomic imbalances in the

economies of the Member States. These events provoked calls for tighter budgetary

106 Duff supra n. 93 107 Habermas supra n.17, p.3 108 Habermas supra n.17, p. vii

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control and stricter surveillance of financial institutions to ensure the stability of the

Eurozone and the trustworthiness of the single currency. The result was an alarming

rise in “positive” integration measures intended to patch up the gaps left in the

original design of EMU. On a purely legalistic note, however, the completion of a

closer budgetary and fiscal coordination, as well as a banking union, is being

restricted by the limits of EU law as it currently stands. Over a decade after the

introduction of the single currency, Eurozone Member States continue to be

individually responsible for the soundness of their budgets and observance of their

fiscal obligations, while the degree of interdependence between them continues to

grow.

As is now widely recognized, economic policy coordination was overlooked from the

inception of EMU. The Union competence in that sphere remained shared with that of

the Member States and there was no transfer of fiscal authority in the way that

monetary competence was transferred to the ECB. Alexander Lamfalussy identified

this fundamental shortcoming as the “weak E”109 of EMU years before the financial

crisis hit Europe. He argued that there was a need for an improved institutional

structure in order to ensure the effectiveness and stability of EMU. Unfortunately, no

action was taken to address these sources of tension, which coupled with disregard of

the SGP, soft enforcement mechanisms for non-budgetary economic policy

coordination and irresponsible public financing presented the conditions for a perfect

storm. As a result, the Eurozone Member States had to overcome their reluctance and

adopt economic governance reforms in a desperate attempt to contain the raging

crises. These crisis-fighting measures, among which the SGP-enhancing Six Pack, the

“two-pack” for strengthening of budgetary surveillance, the Treaty on Stability,

Coordination and Growth and measures codifying the foundations of a Eurozone

banking union110, have received strong publicity111 and will not be analysed in detail

in this work. It is sufficient to note, however, that some of them (in particular, the 109 Mark Milner, “Europe’s Financial Architect: An interview with Alexander Lamfalussy”, The Guardian, Saturday 16th August 2003 110 Final political agreement was reached recently on both the regulations establishing the Single Supervisory Mechanism (April 2013) and the Bank Recovery and Resolution Directive (June 2013). 111 For a comprehensive overview of EU crisis-fuelled economic governance see: <http://ec.europa.eu/economy_finance/articles/governance/2012-03-14_six_pack_en.htm> accessed 12th July 2013

32

SSM and the Fiscal Compact) were considered vital emergency measures, but are

increasingly criticized for lacking democratic accountability and therefore, being

unsuitable as a long-term solution112. This resonates the opinion of the German

Chancellor Angela Merkel who insisted that long-term framework for future crisis

prevention must be embedded in the Treaties so as to be “legally unchallengeable”113.

Following this line of thought, the Commission put forward proposals for deeper

economic reform in which they recognize that a start can, and has been, made by

using secondary EU law (and international agreements), but certain medium- and

long-term measures will inevitably necessitate a revision of the Treaties.

The medium-term objectives of the Commission’s Blueprint center upon the ideas of

collective budgetary control to avoid negative spill-over effects, stronger coordination

of taxation and employment policies and the creation of a fiscal capacity for EMU.

Since the crisis, the powers of the EU to intervene in national budgetary processes

have gradually been extended to empower the Commission with an opinion over draft

national budgets and ability to require a revised draft of those if it detects non-

compliance with the rules of the updated SGP114. Going further, by requiring a

revision of national budgets that have already been implemented, however, would

overstep the competence for coordination of budgetary policies of Euro area Member

States as provided for in Art 136 TFEU. Due to the special position that taxation and

labour and social policies hold in the core of national sovereignty, any power to

collectively manage those will have to be expressly granted by the Member States.

Furthermore, the establishment of a fiscal capacity to support structural reforms

within EMU will have to be given a Treaty base, especially if it is to be able to

borrow money to subsidise such reforms, as there is currently no provision that allows

the EU to set up such mechanism.

112 Opinion of European Commission Vice-President Viviane Reding, <http://ec.europa.eu/debate-future-europe/ongoing-debate/articles/article_use_20130605_en.htm> accessed 20th July 2013 113 Quentin Peel, “Merkel Insists on Treaty Change”, Financial Times, 27th Oct 2010 114 The latest extension of Union powers was effected by the “Two-pack” regulations, agreed on 12th March 2013

33

Bolder proposals, such as the establishment of a European Debt Redemption Fund,

would definitely necessitate a new Treaty provision115 to iron out details on the

amounts of transferrable debt, duration of operation of such a fund, conditions for

participation and other arrangements for its successful functioning. An even more

radical step would be the authorization of collective debt-issuing via the adoption of

Eurobills, so as to eliminate the country-specific differentiation of sovereign credit

risk. Provided that such an instrument for collective issue of sovereign debt

overcomes concerns of Member States, such as Germany, about its potential to cause

moral hazards116, if it is ever to be adopted, it will certainly require a change in the

Treaties. What is more, the resulting need for closer cooperation and supervision of

Member States’ debt management might have to result in the establishment of an

EMU Treasury within the Commission, the institutional arrangements for which

would also have to be enshrined in the Treaties. Eventually, the Commission

envisions the achievement of a full fiscal and economic union with its own central

budget and capacity to impose budgetary and fiscal decisions on its members, which

would be made possible only by the necessary pooling of sovereignty which also pre-

supposes a greater degree of political integration.

With regards to the proposals for banking Union, the Commission’s main aim is to

break the vicious circle of cross-subsidisation between sovereigns and their banks.

Any future treaty change would have to settle the issue of controversial separation of

the supervisory and price-stability competence of the ECB, as agreed by political

leaders in April this year117. Creating a solid Treaty base for common frameworks for

deposit protection and recovery and resolution of failing banks will be a must, in

order to ensure the universality of application of such mechanisms. Developing an

accountable institutional framework to oversee this EU-level cooperation, however,

will go beyond the provisions of the Lisbon Treaty118. Nevertheless it is important to

115 Blueprint supra n.2, p.29 116 Germany fears that a joint guarantee of Eurozone members’ liabilities would create an incentive for national governments to spend beyond their means. 117 Council conclusions, 18th April 2013, <http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/136846.pdf> accessed 25th June 2013 118 Wolfgang Schäuble, quoted in “Berlin demands EU treaty change for banking Union”, 15th April 2013, available at: <http://www.euractiv.com/euro-finance/germany-requires-treaty-change-b-news-519105> accessed 20th July 2013

34

note that recent debates show that Member States have been antagonized by the

prospect of such a contentious treaty reform and as a result are more likely to prefer a

national solution rather than a pan-European institution119.

In a nutshell, decisive steps towards a deep and genuine EMU would need to be

accompanied by express pooling of sovereignty by Member States as they will go

beyond simple coordination of budgets and surveillance of the financial sector, and

affect all aspects of budgetary planning and as a result encroach on a jealously-

guarded privilege of national parliaments. Optimizing EMU’s stability and stamina to

withstand future crisis will only be possible by mirroring the achievements in

monetary policy, thanks to which the ECB, as a federal body, was able to act swiftly

to ensure the irreversibility of the euro and the return of investor confidence, whilst

decisions on financial support mechanisms have been slow and probably

inadequate120. If the Eurozone does indeed need an “economic government” with its

own full-time president, budget and coordinated tax system121, this can only be

achieved by means of treaty change.

C.  Reform  Treaty  vs.  Constitutional  treaty    

As demonstrated by the previous section, there are significant reasons why European

policy-makers should take the idea of changing the Treaties seriously. With

influential European leaders conceding that EU treaty change “will be necessary”122

and prominent MEPs making tentative suggestions that formal talks on treaty revision

should start in early 2015123, one issue that will have to be settled is the question of

form. In the following paragraphs, this work will explore two options- a) a reform

Treaty, which would simply “tweak” the necessary provisions and perhaps introduce

119 The agreement reached at the end of June on the Bank Recovery and Resolution Directive retained the national responsibility for the resolution of failing banks. 120 Alberto Majocchi, “Towards a European Federal Fiscal Union”, Perspectives on Federalism, vol.3, issue 1, 2011, pp.78-98; p.96 121 François Hollande, quoted in Angelique Chrisafis, “François Hollande says Eurozone needs its own full-time president”, The Guardian, 16th May 2013 122 French president François Hollande, 28th June 2013, <http://www.euractiv.com/future-eu/hollande-treaty-change-necessary-news-528975> accessed 18th July 2013 123 Guy Verhofstad in Laurence Peter, “EU needs new Fundamental Law”, 3rd June 2013, <http://www.bbc.co.uk/news/world-europe-22756558> accessed 28th June 2013

35

a few new ones, so as to accommodate the needed reforms, and b) a fundamental

overhaul of the EU’s legal framework and the enactment of a new constitutional

treaty.

To begin with, it is important to clarify which Treaty revision procedure should be

used. The Lisbon Treaty provides for two choices in this respect- the ordinary

revision procedure and the simplified revision procedure. The limitations124 of the

latter, however, make it inapplicable in the context of radical reforms of EMU. Steve

Peers, on the other hand, believes that deeper “economic governance” could be

realized within the confines of the simplified revision procedure if all the powers to

act to this end were to be conferred to the Member States to act collectively125. This is

largely describing the scenario under which Art 136 TFEU was amended in 2011 to

create the ESM. With plans for economic reform envisaging harmonization of

budgetary rules and the creation of pan-European surveillance and solidarity

mechanisms, the extension of EU competence will be an unavoidable consequence,

which would prevent the application of Art 48(6) TFEU.

Revision procedure decided, it is time to turn to the two options. A more modest

change of the Treaties would constitute “fixing” only the parts that are “broken”. It

would follow suit with the long tradition of revision of the founding treaties,

constituting simply “an amendment of the existing treaties to be accomplished

according to existing rules of change”126. As already mentioned, the scope of this

work is largely limited to discussing measures of fiscal and banking integration, but

this is not to say that these will be the only problem areas that will be reformed should

a treaty change be undertaken 127 . Returning to our focus, however, the most

anticipated reforms will relate to Parts of the Treaties that deal with EMU (mostly

Chapter IV of TFEU), the EU’s common policies and institutional arrangements, so

as to incorporate proposals for deeper budgetary integration, the potential creation of

a common economic policy and the empowerment of new (or existing) institutions

124 Art 48(6) only applies to Part Three of the TFEU and cannot serve to increase the competences conferred on the Union in the Treaties. 125 Peers supra n.78, p.87 126 Bruno De Witte supra n. 100, p.107 127 In fact, areas of defence, Common Foreign and Security Policy and extension of the CJEU’s jurisdiction are also very likely to make it to the reform agenda.

36

with important new tasks. In this regard, Andrew Duff makes a suggestion for a

provisional Convention agenda128 to include, among others, amending Art 5 TFEU to

substitute coordination with harmonization of national economic policies, changing

Art 123(1)TFEU to allow the ECB to assume the role of Lender of Last Resort

(LOLR) and to give it powers to issue Eurobonds, and updating Art 126(6)TFEU to

reflect the changes introduced by the Six Pack (e.g. reverse qualified majority voting

for EDP). Duff also proposes certain procedural changes such as amending Art 48

TEU to permit entry into force of any new treaty once ratified by four-fifths of

Member States and widening of Art 275 TFEU to give the CJEU jurisdiction over

operational aspects of CFSP, to mention but a few. Following the logic of the Lisbon

Treaty, a new Reform Treaty would make substantial amendments to the relevant

articles of the Treaties and perhaps introduce some new ones to give appropriate legal

basis for envisaged economic and banking unions, but will fully preserve the pre-

existing two-treaty architecture. As this work previously argued, however, such a

patchwork of primary law provisions is hardly the most efficient way to organize the

EU legal framework. Despite proclamations that the two Treaties and their protocols

“should be read as a seamless ensemble of primary law”, a new Reform Treaty would

clearly continue the trend of nonsensical repetitions and allocations129 of articles

between them.

To solve this inefficiency, and for a number of other reasons discussed below, this

work makes a provocative suggestion that perhaps a more fundamental overhaul of

the Treaties is in order. Admittedly, the last big attempt to develop the Union along

more federal lines was certainly not a success story. The Treaty Establishing a

Constitution for Europe was rejected in referenda by the electorates of two of the

founding Member States of the EU and threw the integration project into a serious

political crisis. But “abandoning”130 the constitutional project altogether was perhaps

pre-mature in light of the failure of the Lisbon Treaty to keep the promise of its 128 The full text of the agenda is available here: <http://andrewduff.eu/en/article/2011/538248/andrew-duff-launches-convention-agenda> accessed 20th July 2013 129 For instance, the split between basic provisions on the types of competence contained in Art 2 TFEU, while provisions on principles of conferral, subsidiarity and proportionality are in Art 5 TEU, or between the provisions establishing the EU institutions in the TEU and those on decision making, types of legal acts and jurisdiction of the CJEU in the TFEU. 130 Presidency Conclusions of the Brussels European Council, 21st -22nd June 2007

37

drafters that it will complete a cycle of reforms following which there will be no need

for a further Treaty change for a while. Let us take our Eurosceptic glasses off for a

moment and allow for the possibility that a new constitutional treaty might be chosen

as the vehicle for the implementation of the reforms that were necessitated by

Europe’s crises. There are at least two good reasons why such a contentious thought

should be entertained.

First of all, the choice of a single constitutional treaty will provide the much-needed

organizational simplification of the EU’s legal provisions. In an attempt to avoid

repetition with part A of this section, it will be reiterated that a single and well-

ordered document would bring coherence and ease of use, especially if this is

complemented by a less technocratic and easy-to-understand language. As proposed

above, the volume of such document could be reduced in comparison to the failed CT,

by avoiding repetition and incorporating some protocols within treaty articles.

Granted, it will hardly be the “pocket size”131 that certain politicians would like to

see, but for a document purporting to contain all132 primary legal provisions of such a

complex creature of international law as the EU, it will provide a relatively

satisfactory solution.

The second reason in support of a consolidated constitutional document, that this

paper puts forward, is that such a choice will be normatively desirable. A sui generis

organization such as the EU would benefit from having a constitutional charter in two

senses. First, it will be a descriptive representation of the established institutional

framework that delimits the powers of main organs and the allocation of governance

authority between the national and supranational level. Secondly, because

constitutions are traditionally thought of as resulting from an agreement of the

“people”133 (a social contract), it will provide an ingrained sense of democratic

131 In an article for The Economist Jack Straw expressed the wish to see the EU Constitution resemble that of the UN and the US, which could both fit into his pocket, “A Constitution for Europe”, 10th Oct 2002, <http://www.economist.com/node/1378559> accessed 18th July 2013 132 Of course, that is not taking into account the Treaty Establishing the European Atomic Energy Community (Euratom) and decisions by the CJEU, which are also sources of primary EU law. 133 Ingolf Pernice, “Does Europe Need a Constitution? Achievements and Challenges after Lisbon” in Anthony Arnull et al., A Constitutional Order of States? (2011), Hart Publishing, pp.75-98, p. 81

38

legitimacy by means of emphasizing the importance of the citizens as agents in the

integration process. It is exactly those objectives of democratic legitimacy,

accountability and engagement of the public that will make a new constitutional treaty

a superior form of future economic integration compared to a reform treaty. In this

respect, it might even be desirable to reintroduce the symbolism that was proposed by

the old CT in an attempt to channel a new sense of “Europeannes”, of sharing a

common goal, and being in the “same boat”134. It can be hoped that with time this

common feeling of belonging will transform into social solidarity and, perhaps with

even more time, economic solidarity. Yet politicians of today, pressed by the urgency

of the crises, are starting from the opposite end- they expect Member States to

cooperate closely in economic measures and to take part in common resolution

mechanisms, but the foundations of social solidarity between them have been

overlooked. Therefore, due to the shortage of time, the role of a new constitution

would be to introduce the social solidarity component in an attempt to justify the

necessity of economic solidarity. It follows that its role will be justificatory, rather

than pre-emptive.

Bearing in mind the fate of the last Constitutional Treaty, it will be unwise to dismiss

certain “lessons” that the failed CT tried to teach. A popular misconception is that one

of the main reasons for the Dutch and French rejections in 2005 was the ideological

charge of the text as represented by the reference to federalist symbols. Upon close

examination of the post-referendum surveys in both France and the Netherlands,

however, the list of reasons for the negative vote would appear to be topped by

national issues. In France, for instance, the majority said they voted “Non” on the

ratification referendum due to general dissatisfaction with the domestic situation in

the country, a fear that the Treaty would increase unemployment and concerns that

the Treaty was too economically liberal135. In both Member States only a low

proportion of the people surveyed admitted they rejected the CT because they were

opposed to the idea of a European federal state/a “United States of Europe”- 5% of

Dutch 136 and 2% of French voters 137 . This would suggest that incorporating

134 Jose Manuel Barroso, State of the Union Address, 2012 135 Post-referendum survey in France, Eurobarometer, June 2005, section 2.3. 136 Post-referendum survey in the Netherlands, Eurobarometer, June 2005, section 2.3. 137 Ibid.

39

symbolism and federal rhetoric into the Treaty text was not a deal breaker. Eight years

on, the situation might have changed slightly with the rise of popularity of some anti-

establishment and openly anti-European movements, but it is doubtful that any

potential rejections will be based primarily on dissatisfaction with symbols aiming to

create solidarity. When it comes to the question of popular support, or lack of it, it is

likely that the main factors influencing voters’ sentiments towards a new treaty will

relate to economic situation and domestic politics.

Another flaw of the rejected CT was the fact that it contained the word “constitution”

in its title. Many politicians felt that it had very strong federal connotations and

signified the creation of a European superstate, which hinted at a far deeper political

integration than certain sovereignist member states were ready to accept. Using the

name “constitution” has been considered misleading and a political mistake138 which

was rectified with the Treaty of Lisbon by returning to the familiar model of naming

the agreement after the location of its signing. The present work, while being aware of

how unlikely this is, argues that naming the new EU treaty a constitution would have

its benefits for the enhancement of European values and increasing popular

attachment to the European project, as citizens (especially those from Member States

with written constitutions) would find it easier to recognize the importance of the

provisions contained in it. In any case, be it called a Constitution or not, the new

treaty will certainly possess a constitutional character in the sense that it will provide

the legal basis for the extension of the powers of the EU and at the same time provide

the limits of those powers. The form of the treaty will ultimately depend on the

willingness of political leaders involved in the process and the levels of public support

that it bolsters.

138 Piris supra n.6, p.45

40

V. The question of popular support. Is persuading the

public the hardest part of the process?

Even the most elaborate proposal for future Treaty change is doomed to fail if it

disregards the important role that public opinion plays for the constitutional evolution

of the European Union both directly, via the medium of ratification referenda, and

indirectly, by legitimizing national political regimes which are the main actors at the

supranational level. The crises of the past five years have resulted in a rise in austerity

measures, which provoked a fundamental change in attitude towards the European

project, from the permissive consensus of the past to public debate and social

unrest139 in some of the worst affected Member States. In countries where the EU (as

part of the Troika) is portrayed as the “Brussels monster”, imposing demands for

harsh spending cuts and reduction of people’s standards of living as conditions for

granting of financial aid, the levels of popular dissatisfaction with the ideals of

Europeanization have seen a dramatic increase. There is a danger in using the crises

as a justification for the dismantling of the welfare state, however, as it leads to the

erosion of the legitimacy of national governments, which produces indecision and

cautiousness at the level of EU policy-making. Signs of such popular disillusionment

are already visible in rising levels of distrust in national governments across the EU-

27, which reached 67% in 2012140. Following a similar trend, levels of public

confidence in the EU have also dropped to record lows even in traditionally pro-

European countries such as Italy, Spain and Germany141. With such troubling facts in

the background, it is no surprise that many dismiss the idea of treaty change as

inconvenient and perhaps, unrealistic. Consistent with earlier sections, this paper

argues here that securing popular support for a change of the founding treaties is not a

mission impossible as long as the process fulfills three main conditions.

139 Giandomenico Majone, “Rethinking European Integration After the Debt Crisis”, Working Paper No.3/2012, The European Institute, UCL, p.6 <http://www.ucl.ac.uk/european-institute/analysis-publications/publications/WP3.pdf> accessed 22nd July 2013 140 Standard Eurobarometer 77: Public Opinion in the EU, Spring 2012, section 4.2 141 Jose Ignacio Torreblanca & Mark Leonard, “The Remarkable Rise of Continental Euroscepticism”, 25th April 2013, <http://ecfr.eu/content/entry/commentary_the_remarkable_rise_of_continental_euroscepticism129> accessed 15th July 2013

41

First of all, as argued above, in order for a new EU Treaty to succeed, it would have

to contain bold proposals regarding issues of immediate concern to the majority of

European population. Economic considerations are, unsurprisingly, the leading

category of salient issues that the EU should be seen to address with most Europeans

being concerned by rising prices (45%), unemployment (21%) and the national

economic situation (19%)142. Therefore, proposals for fiscal and banking union,

carefully deconstructed and explained, have a good chance of generating popular

support due to their ultimate aim of providing financial stability, accountability and,

ultimately, the return of economic prosperity. While the failure of the CT could be

attributed to the absence of a key substantive goal inspiring change143, a new Treaty,

as advocated by this paper, will have the goal of optimizing the workings of EMU and

the development of banking policies with the specific aim of preventing future crises.

This should provide sufficient inspiration for further transfers of power to the EU.

Secondly, a Treaty change would have to grant more opportunities for direct political

involvement, so as to give electorates a sense of being able to affect critical policy

choices and confirm or reject European governance144. Ideally, the proposals for a

new treaty will enter the public sphere prior to the 2014 EP elections so that the

public can choose MEPs on the basis of their positions with regards to the proposed

reforms, rather than on purely national political agenda, as is usually the case. Now

that people have began to realize how profoundly EU decisions pervade their lives,

they are likely to express more interest in making use of their democratic rights as EU

citizens145. The traditional elite-led model of policy-making where decisions are

primarily made by “faceless Eurocrats” in backrooms and then served to the public in

pretty wrapping with labels “for your own good” encourages a feeling of

powerlessness evidenced by the fact that only a third of citizens feel that their voice

counts in the EU146. A further indication of the spreading “democratic deficit” can be

found in the steady decrease in turnout for EP elections from 63% in 1979 to 43% in

142 Eurobarometer 77 supra n. 140, s. 1.3. 143 Andrew Moravcsik, Europe Works Well Without the Grand Illusions, Financial Times, 14th June 2005 144 Joseph Weiler, The Constitution of Europe (1999), Harvard University Press, p.266 145 Habermas supra n.17, p.49 146 Special Eurobarometer 379: The Future of Europe, April 2012, Section 1.4.1

42

2009147. A new Treaty could change this by, for example, introducing pan-European

EP elections during the course of which citizens will be given a chance to vote for a

president of the European Commission. Given the instrumental role of the

Commission as initiator of legislation, this way the electorate will have a say on the

direction of European integration.

Lastly, a change in the Treaties will have to come with a corresponding re-

invigoration of ideas of solidarity and belonging to one Union. The EU is suffering

from a problematic identity and lack of cohesiveness, which are made worse by

scathing reports of national media and anti-European propaganda by nationalistic

movements. To overcome this, there needs to be more openness and public debates on

policy proposals, instead of decisions being taken by unaccountable summits. The

introduction of mechanisms of EU-level control and effective enforcement of

commonly agreed economic policies would be beneficial for trust-building, while the

introduction of debt mutualisation instruments (e.g. European Debt Agency and

Eurobonds) would symbolize the eventual acknowledgement by Member States of the

irreversible interdependence of their economies.

Even though it is not the only difficulty associated with treaty change, securing

popular support is vital for ensuring smooth ratification and as such constitutes a

disadvantage as opposed to the other two reform routes. Yet the greater clarity that

treaty amendment brings compared to using in-treaty dynamic provisions and higher

levels of legitimacy than those enjoyed by intergovernmental bargaining provide a

good incentive for European policy-makers to make an effort to involve the public.

147 Piris supra n.6 p.33

43

VI. Conclusion

Overall, providing a clear indication of the direction of European constitutional

evolution has proved a tricky matter. None of the three available vehicles of change

presents an ideal scenario with all suffering from some shortcomings. Using existing

treaty clauses for authorizing reforms has the obvious advantage of not requiring any

further transfers of power from the national to the supranational level but it is also

constrained by narrow measure-specific limitations which make the realization of an

ambitious fiscal and banking union practically impossible. The contraction of

intergovernmental agreements of variable membership, while previously justified by

the need for an urgent response to the crisis, should be avoided now that the “worst”

is behind us due to their erosive impact on the cohesiveness and continued relevance

of the European project. From the discussion above it becomes clear that changing the

Treaties will be the best way to accommodate bold fiscal, budgetary, and ensuing

political reforms of the EU. Overt transfers of economic competence, adjustment of

cumbersome procedures, such as unanimity, and the rejuvenation of federal

aspirations (if a constitutional treaty format is chosen) will indisputably restore hopes

that the EU will successfully overcome the challenges it is faced with and will

continue on its usual path towards deepening integration. But being hopeful does not

necessarily mean being naïve. Precisely because of such radical changes the option of

treaty revision is destined to face significant difficulties. The presence of an

integration impetus is questioned by the apparent lack of political will to proceed with

anything but ad hoc measures and the uncertainty as to whether EU citizens would

support the externalization of important national competences to an entity whose

image as a promoter of prosperity has been badly damaged. In any case, it seems

unlikely that any decisive action to put Treaty change on the agenda of policy-makers

will be taken prior to the European Parliament elections in 2014. Until then the Union

will have to continue using the tools at its disposal and hope for a brighter, more

determined future.

44

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Table of cases

BVerfG, 2 BvE 2/08 Treaty of Lisbon, 30th June 2009

BVerfG, 2 BvR 2134/92, 12th Oct 1993

BVerfG, 2 BvR 987/10, 7th Sep 2011

Case Pl ÚS 19/08 Treaty of Lisbon I, 26th Nov 2008

Case C-370/12, Thomas Pringle v Government of Ireland, 27th Nov 2012

Table of legislation

Act 107/1999 Coll., as amended by Act 162/2009 Coll. Standing Rules of Czech

Senate

Council Conclusions on Bank Supervision, Brussels, 18th April 2013

Decision of the Council 2010/320/EU of 8th June 2010

Decision of the Council 2011/ 199/EU of 25th March 2011

European Union Act 2011, UK Parliament

Presidency conclusions, Council of the EU, 14th Dec 2007

Presidency Conclusions of the Brussels European Council, 21st -22nd June 2007

Protocol on the Concerns of the Irish People on the Treaty of Lisbon, OJEU 60, p.

131, 2nd March 2013

49

Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21st

May 2013 on the strengthening of economic and budgetary surveillance of Member

States in the euro area experiencing or threatened with serious difficulties with respect

to their financial stability

Regulation (EU) No 473/2013 of the European Parliamnet and of the Council of 21st

May 2013 on common provisions for monitoring and assessing draft budgetary plans

and ensuring the correction of excessive deficit of the Member States in the euro area

Treaty on the Functioning of the European Union (TFEU)

Treaty on European Union (TEU)

Treaty on Stability, Coordination and Growth (TSCG)

Treaty Establishing the European Stability Mechanism (ESM Treaty)