During the course of the crisis what had been a structural deficit of democratic accountability, as criticized by, e.g., the German Bundesverfassungsgericht , has, contradictorily, been joined by a dearth of executive decision-making on the European level. The historic, cherished Community Method in its post-Lisbon format essentially proposes a consensual approach to governance marked by a broad vertical and horizontal agreement between (and in this particular order I would argue): The national governments represented in the (European) Council, the European Parliament, some national parliaments, the Commission, and, finally, the remaining national parliaments.
As we know from the political scientist George Tsebelis’ work the higher the amount of veto players the fewer significant decisions will be taken. It thus becomes quite comprehensible how little ground-breaking moves in the face of the Euro crisis have been made; why decisions based on the smallest common denominator are taken only when policymakers find themselves – once more – with their back to the wall.
The ensuing void in European-level policy-making has allowed – or forced if you may – the sole individual actor with exclusively-in-house-majority decision-making rules to move center stage. The European Central Bank (ECB), a young institution only founded in 1993, has developed from an ugly duckling – quick, without cheating, what do you remember about the first ECB President Wim Duisenberg? – into an impossible to ignore swan – with the global financial media hanging onto the current President Mario Draghi’s every single word.
The ECB has saved the common currency in the face of policymakers’ inaction multiple times. It brought spreads between the core and the periphery down. It has allowed national central banks to keep their respective banking sectors afloat. It has relied on a massive low-interest liquidity injection to counter a threatening credit crunch. It had, finally, and before Cyprus became the issue, seemingly brought the crisis under control following Draghi’s mere announcement of unlimited support of the Euro.
The ECB’s decisive – if belated as may be argued – action, filling the void opened up by the EU’s tedious all-encompassing consensual (in)decision-making, has aggravated doubts about the EU’s democratic deficit though. Let me cite the three most problematic examples here:
1) German representatives on the ECB Governing Council have been consistently outvoted in the initiation of the above-outlined non-orthodox monetary mechanisms to the point that both the Bundesbank President Axel Weber and ECB-board member Jürgen Stark resigned in 2011. ECB voting rules not (yet) reflecting population nor economic importance, a majority of small member states may outweigh preferences of a majority of citizens.
2) The ECB essentially prescribed the democratically elected Italian government what kind of economic reforms that government should pass in its infamous letter of August 2011. The central bank underlined its implicit policy conditionality when its purchases of Italian governments bonds, originally intended to limit the spread with German bonds, effectively ceased in reaction to the Berlusconi government’s faltering reform efforts – thus directly contributing to the downfall of the – sovereign and, let me repeat this, democratically elected – Italian government.
3) After Ireland in 2010, the ECB once again has used its veto-power over liquidity provision in Cyprus to put pressure on sovereign, democratically-elected governments to accept a EU bail-out program under conditions defined for the most part outside of the country in question.
Now, one might wonder why it is a problem that the ECB steps in where other institutional EU actors fail to step up. And it is clear that a failure of the Euro is a distinctive possibility in the face of ECB inaction. Yet, the true nature of the problem lies in the displayed belief in the existence of apolitical technocratic policy-making. The ECB puts forward a policy solution, say austerity or the exclusion of senior bondholder as part of bail-in programs, to a given problem and has the capacity to strongly pressure states into accepting this solution. Yet, the proposed policy is not based on a universal truth that will definitely put an end to the crisis nor is this policy cost-free or non-redistributive. In the Irish case for example tax-payers had to assume the costs of a credit risk entered into by others, a policy the ECB adapted for Cyprus, underlining the fallibility of its policies.
It is the democratic unaccountability of and lack of outside control for this pseudo-neutral technocratic approach as exemplified by the ECB but permeating EU policy in general that has accentuated the previously existing democratic deficit of the European Union.
Benjamin Preisler holds a MA in political science and economics with credits amongst others coming from the Free University Berlin, Sciences Po Paris, and the University of North Carolina. He most recently worked as a risk analyst based out of Tunisia and currently studies at the College of Europe in Natolin.
