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The Greek Crisis–A Symptom of the EU’s Constitutional Malaise

Nicole Scicluna, Department of Political Science and International Studies (POLSIS), University of Birmingham

The euro crisis started in Greece and to Greece it returned. Since the Syriza government’s election in January 2015, we have seen a succession of intense and sometimes acrimonious exchanges between Greek officials and representatives of the IMF, EU and member state governments, which culminated on the last weekend of June in bank closures and the announcement of a referendum on the terms of an expired bailout. These bizarre events demonstrate at least three things clearly.

Firstly, that five years of ad hoc crisis management–including the negotiation of a new fiscal stability treaty, the creation of multiple bailout funds, and the (potentially illegal) expansion of the European Central Bank’s (ECB) mandate–have failed to resolve the problems that sparked the crisis in the first place.

Secondly, that intra-EU solidarity has been stretched to breaking point and that trust amongst citizens, national governments and EU institutions is in desperately short supply.

Thirdly, and following from the first two points, that the euro crisis always was and remains a crisis of EU constitutionalism.

What do I mean by that?

The crisis shows that the EU’s constitutional system has failed to get the balance right between the competing imperatives of democracy and technocratic governance, as well as between the needs of individual citizens, national citizenries, and states in a highly diverse supranational polity. Fritz Scharpf famously asked 16 years ago whether EU governance could be both ‘effective and democratic’? Right now, it appears to be neither.

Take recent events in Greece. On June 28, the Greek government announced the imposition of capital controls, including bank closures and a 60 euro per day limit on withdrawals from cash machines. The proximate cause of these drastic measures was the ECB’s earlier decision to maintain Greece’s emergency liquidity assistance at current levels, when a significant increase would have been needed to counter the accelerating run on the country’s banks. It is deeply troubling from a democratic perspective that such an important political decision was left to the nominally apolitical and independent central bank. The ECB’s assumption of such a significant leadership role is equally concerning from a legal perspective, since the Bank’s mandate is narrowly focused on price stability. (A very strong case can be made that the ECB’s original mandate was too restrictive but, again, from the point of view of legality, this does not excuse the failure to match its de facto empowerment with a de jure adjustment to its charter.)

The device of the referendum is also interesting. A cynical reading would be that, having been unable to secure acceptable terms from Greece’s creditors, prime minister Alexis Tsipras was seeking to shift responsibility for his failure on to the Greek electorate.

According to this logic, a ‘yes’ vote would mean that Greeks only have themselves to blame for the austerity that follows (thereby absolving the government that urged them to reject the creditors’ terms). Similarly, the consequences of a negative result, which could include exit from the eurozone, would also be the responsibility of ordinary citizens. From this perspective, the referendum is a tool for the Syriza government to deflect blame from its own mistakes and to legitimise its unnecessarily hostile negotiating tactics.

Former prime minister George Papandreou tried a similar tactic with a previous bailout in 2011, but was forced to call off his referendum, under pressure from the French and German governments. Indeed, it was not completely clear at the time of writing that Tsipras’s referendum would go ahead, as the Syriza government’s position towards its creditors continued to swing between ‘conciliatory’ and ‘confrontational’.

Unsurprisingly, Greek government figures were pushing a much more public spirited view of the referendum call. Finance minister Yanis Varoufakis tweeted after its announcement that: ‘Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!)’. But this claim is dubious. Aside from being an abdication of responsibility by an elected government, referendums are a blunt tool and not well suited to policy making. Holding a referendum barely a week after it is announced doesn’t allow much time for a sober assessment of the issues at stake, either. Moreover, if democracy really is the key concern, then one may ask why the preferences of Greek citizens should be decisive over those of citizens of the other euro states, when the bailout involves their money too. An obvious retort to this last point is that the Greek government has no authority to call such a ballot, but this only brings us back to the lack of European-level democratic mechanisms that has long bedeviled the EU.

Despite everything, the Greek government does want to stay in the euro – so much so that Varoufakis threatened to take the EU institutions to court to block a ‘Grexit’, since expulsion from the eurozone is not envisaged by the EU Treaties. (Given that the euro crisis has been a five-year-long unravelling of the EU’s legal order, this threat is almost comical.)

So where does all of this leave Europe? The Greek crisis has devolved into a soap opera, full of cliffhangers and last-minute plot twists. It has taken up enormous amounts of the time and resources of EU institutions and national leaders. But it is ancillary to the real problems that confront the European project. Even resolving Greece’s debt situation (already highly unlikely) would not solve, or even alleviate, the EU’s underlying constitutional crisis. That would take major reform – including legal recognition of the Eurogroup, which has become one of the eurozone’s most important institutions, but which remains an informal body (as Varoufakis discovered, much to his annoyance, when they had a meeting without him), as well as an overhaul of the ECB’s powers and place within the eurozone’s broader economic and political structure.

The chances for such massive reform are slim. The current lack of trust amongst EU actors, the inability to deal with other pressing concerns such as the migrant crisis and the conflict in Ukraine, the surge in populism in many member states, and David Cameron’s parallel mission to renegotiate the terms of Britain’s EU membership all militate against a calm and rational discussion of the EU’s future. Having missed one ‘constitutional moment’ in 2005, another does not look like appearing anytime soon.

Suggested Citation: Nicole Scicluna, The Greek Crisis–A Symptom of the EU’s Constitutional Malaise, Int’l J. Const. L. Blog, July 2, 2015, at: http://www.iconnectblog.com/2015/07/the-greek-crisis-a-symptom-of-the-eus-constitutional-malaise

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Published on July 2, 2015
Author:          Filed under: Developments
 

2 Responses

  1. What is needed is further discussion of what constitutional changes are needed to prevent such disasters from occurring going forward.

    The first step is to recognize that nations, like people, cannot live on borrowed money they can never pay back. That means they should not even be permitted to borrow for anything but short-term emergencies, like wars or major disasters that leave the nation productive enough to recover and pay the debt.

    Those who made loans to Greece and other nations to pay for their regular expenditures, like health care and pensions, are as much at fault as the borrowers, who should be tempted to do what is politically popular but unsustainable.

    Government bond markets need to be shut down globally, except to help in recovery from emergencies. That applies as well to the richer nations as to the poorer. The rule everywhere should be made “pay-as-you-go” from current revenues, even for major infrastructure projects like roads or bridges, which can be paid for as revenues come in, or governments can save until they have enough.

    And benefit programs like government-funded pensions and health care need to be eliminated everywhere. People must learn to save for such things and pay their own way. Compassion is for private charity, not public entitlements. Will that bring widespread public misery? Yes it will, and there is no helping that. There is no right to receive the means for life, only to not having government impede acquiring one’s own.

  2. Correction in above message: Should read “should not be tempted”.

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