Federalism / Politics

A “Federation of nation States” and other keywords of the State of Union address

On Wednesday 12th September 2012, the President of the European Commission (EC), José Manuel Barroso, addressed the Members of the European Parliament (MEPs), during their plenary session, to deliver the annual State of Union address. This initiative born decades ago in the USA is still too little mediatized in several Member States, notably France, as Gilles Johnson wrote on this blog in a previous article.

The present article aims at sharing with you the most important parts of the speech, using a series of keywords and following approximately the same sequence of ideas as in the address. Furthermore, I will sometimes add a personal opinion, in order to stimulate the debate. 

I/ Analysis of the situation. Keyword n°1: crisis

It is the logical start of a State of Union address. I think J. M. Barroso has correctly identified the plurality of crisis we have to face: “a financial and economic crisis”, “a social crisis”, “but also a political crisis, a crisis of confidence”.

Indeed, the origin of the crisis in 2008 is financial (collapse of Lehman Brothers, subprime loans, financial instability) and political (let us remember the too lax monetary policy of the Fed to stimulate growth after the Internet bubble had blown up at the beginning of the new millennium). This crisis had such an impact on the global financial system (therefore it was called a “systemic crisis) that it led to an economic crisis, with a recession and higher unemployment in many countries.

Because of this 2008 crisis (that cost a lot of money to the taxpayers, because of growth stimulus and bank rescue packages), but also because of former political errors (too lax national fiscal policies and the absence of an effective economic union as “counterbalance” to the monetary union), the crisis became a debt crisis that affects the euro area in particular.

Yet, some countries have an even higher debt. It is the case, for example, in the USA or in Japan (the latter has a debt to GDP ratio reaching over 200%). So, the crisis cannot be only economic; it is also political: there is a crisis of confidence of investors in the European rulers. This is why José Manuel Barroso called on troubled Member States to prove with acts their commitment to structural reforms in order to improve their competitiveness, while he called on “creditor” Member States to clearly commit themselves to guarantee the integrity of the Eurozone and of the Euro itself. In other words, they have to stop undermining their own decisions and instead work as a true team.

II/ The challenge: a new thinking for Europe. Keyword n°2: Novelty

The EC President declared that Europe had to depart from “old ideas” and had to take “a new direction”.

In order to do this, the starting point is to “really draw all the consequences of the challenges that we are facing” and that are changing the world. In particular, one should notice that “interconnected global markets are quicker and therefore more powerful than fragmented national political systems” and this “undermines the trust of citizens in political decision making”.

According to J. M. Barroso, “globalisation demands more European unity. More unity demands more integration. More integration demands more democracy, European democracy.” So, we have to accept that we are on the same “boat”, in a situation of mutual interdependence and united by common European interests.

For the President of the Commission, “it is the only way we will get the scale and efficiency we need to be a global player”. Some doubt this… I will simply answer that it is true that some lone countries, such as North Korea or Iran, manage to create fears on the global scale because of their nuclear programs. But it is not enough to be a global actor: being a global troublemaker is different from being a global leader respected for its democratic values.

To face today’s global challenges I am convinced, like J. M. Barroso, that “Europe has all the assets it takes” and that “it is time to match ambitions, decisions, and actions”. More precisely, what has to be done?

III/ Response to the situation: the “decisive deal for Europe”

As this part is the most important, I have chosen 5 keywords related to the economic union and 3 keywords concerning the political union (which is however not less important!).

Keyword n°3: Structural reforms

A sustainable growth is necessary to preserve our European social model. In order to reach this goal, we must improve our competitiveness. This requires reforms both at European and national level.

Several structural reforms are mentioned in the speech, such as the modernization of the public administration, the reduction of wasted expenditure and vested interests and privileges or the flexi-security on the labour market. At European level, the remaining barriers to the free market (in particular, to the free movement of workers) have to be brought down, fiscal coordination must be strengthened and the trade policy should become more pro-active. Furthermore, several actions could be undertaken at both European and national level. This includes investing in education and research, in green energies, boosting green growth, etc.

Regarding Greece, the EC President indicated that “if Greece banishes all doubts about its commitment to reform, but also if all other countries banish all doubts about their determination to keep Greece in the Euro area, we can do it”.

He also stated that stabilizing the Eurozone was the “most urgent challenge” and was “the joint responsibility of the Member States and the Community Institutions”. He greeted the ECB’s decision to buy sovereign debt on the secondary market, if necessary, in order to ensure “the integrity of monetary policy”, while reminding that the ECB was independent.

Keyword n°4: European budget

Apart from structural reforms, J. M. Barroso also mentioned another instrument to stimulate growth: a European budget “dedicated to investment, growth and reform”. In order to limit the burden on troubled national public finances, he suggested to create a new own resources system. It is a long-standing demand of the European federalists (which I belong to), as it would enable to benefit from economies of scale (by replacing national investments with greater common European investments) and to implement new projects benefiting the citizens, showing them in a tangible way that Europe acts for them.

An important European budget could invest in cohesion and in European infrastructures to improve the common market, could support agriculture and could encourage research and innovation.

The EC President told that it would be the occasion to see “if the same member States who are all the time talking about investment and growth will now support a budget for growth at the European level”.

Keyword n°5: European social model

The President of the Commission insisted on the fact that these structural reforms had to be “fair and equitable” in order to be accepted by the citizens.

He pointed out, quite rightly in my opinion, that “an effective social protection system that helps those in need is not an obstacle to prosperity”, but “is indeed an indispensable element of it”.

Among the fair and equitable measures, he mentioned the necessity to give a chance to the young people (the Commission will launch a “Youth Package” before the end of the year), the setting up of “better and fairer taxation systems” and the fight against tax fraud and evasion, which cost yearly billion of euros to the Member States.

Additionally, J. M. Barroso reminded that a Financial Transactions Tax (FTT) was still an objective pursued by the Commission and would probably happen through enhanced cooperation among voluntary Member States. It is indeed a question of fairness and social justice, in the words of the EC President.

Keyword n°6: Banking Union

Finally, to complement the current Economic and Monetary Union (EMU), José Manuel Barroso declared that “a banking union and a fiscal union and the corresponding institutional and political mechanisms” had to be created.

The first step towards a banking union is a single supervisory mechanism, at European scale, with a “core role for the ECB” and an “appropriate articulation” with the European Banking Authority (EBA) and national regulators. Contrary to Germany’s wishes, but in accordance to France’s ones, the EC President declared that “it will be a supervision for all Euro area banks”, not only for those of systemic importance.

In parallel, the Commission will continue to reform the regulation of the banking sector, “to make sure it plays its role in the responsible financing of the real economy”.

Keyword n°7: Fiscal Union

The reasons for such proposal are obvious and are mentioned in the speech: “the economic decisions of one Member State impact the others. So we need stronger economic policy co-ordination.”

According to J. M. Barroso, it is the only way to prevent imbalances. We might challenge this statement and imagine that the imbalances could be compensated by permanent transfers from “creditor” countries to “debtor” countries, but this solution is politically impossible to implement, at a time when the citizens in several debtor countries become more and more reluctant to trans-European solidarity… Still on this topic, let us notice that, as recalled by the EC President, some progress has been done, in particular with the adoption of the “Six-Pack” and the Country-Specific Recommendations of economic policy.

Furthermore, José Manuel Barroso insisted on the necessity to have an important European budget (see above, keyword n°4).

In addition, he made clear that it is not necessary “to separate institutions or to create new institutions for that; quite the contrary: for this to be effective and quick, the best way is to work with and through the existing institutions”. I totally agree with his approach of institutional matters. Indeed, most citizens already have trouble understanding how the EU currently works, so there is no need to add complexity to the European institutional organisation while trying to bring the EU closer to the citizens.

Finally, the EC President took the same line as Germany by saying that “it is in such a framework that over time, steps for genuine mutualisation of debt redemption and debt issuance can take their place”. I am favourable to this strategy, as we should not hurry and build a wobbly construction again, with common responsibility for indebtedness, but no common rules as for the use of funds borrowed on the markets.

Keyword n°8: European democracy

“Ultimately, the credibility and sustainability of the Economic and Monetary Union depends on the institutions and the political construct behind it”.

The economy is not the most important; it is the European democracy – basis of the legitimacy of political action – that counts most! And in this framework, the political union is the “horizon”.

José Manuel Barroso calls for the development of “a European public space” that would be a space for debate among European citizens from all Member States. Indeed, it seems to me that such a European public space is necessary to the emergence of a European society and of a truly pan-European democracy. To overcome “fragmentation” to discuss our common future is requisite.

Still aiming at promoting the European democracy, the EC President also wished “a genuine complementarity and cooperation between the European and national parliaments”.

In addition, I think his proposal to strengthen European political parties, so as to avoid “a national debate between national political parties”, in particular at times of European elections, is very interesting. Moreover, as suggested in the State of Union address, it would be a good idea if all European parties named their candidate for EC President before the 2014 European elections, in order to increase the “personification” of these elections, knowing that this could improve their coverage.

Keyword n°9: Sovereignty

As we have seen, this far, the announced (or, at least, hoped) changes are important and require additional transfers of sovereignty from the Member States to the EU.

However, to appease some fears, José Manuel Barroso insisted in his speech on the respect of subsidiarity, which is “an essential democratic concept and should be practiced”. Decisions must be taken at the most appropriate level! This allows me to stress that a federal Europe would not be centralised in Brussels; it would be a polycentric Europe, with multiple decision levels, just like in any democratic federation (USA, Germany, etc.).

Furthermore, the EC President had some very interesting words on sovereignty, asserting that “sharing sovereignty in Europe means being more sovereign in a global world”. And the EU should bring to this global world a message “of freedom, democracy, of rule of law and of solidarity”, i.e. the European values that are the fundament of a political union.

So, regarding the common foreign and security policy (CFSP), J. M. Barroso called upon the emergence of “a new and democratic Syria”. He also insisted that the EU should keep its leadership “at the forefront of development and humanitarian assistance” as well as in “the fight against climate change”.

Based on a political union, there is also the idea of beginning “truly collective defence planning” that could lead to a true European defence policy.

Keyword n°10: Federation of nation States

It is the most commented of these keywords, among the people who followed the speech. At first look, the expression “federation of nation States” seems contradictory: indeed, federalists are usually opposed to advocates of the nation States’ sovereignty. The expression used by José Manuel Barroso is (maybe) the opportunity to challenge this unproductive opposition.

Indeed, in a federal political system, there is one federal State that encompasses several federated States. But the latter do not disappear – it is, I think, what J. M. Barroso wishes to express when he says that it is not about building “a super-state” –.  And any democratic federation applies subsidiarity as well: many decisions continue to be taken at national or local level. A federation does not mean that there is one language, one education or one culture! On the contrary, federalism is “unity in diversity” in accordance with the EU motto.

So, a “federation of nation States” could just mean that the Member States will not lose all their sovereignty; they will have to transfer some competences to the EU (I think, in particular, of some aspects of fiscal policy) but they will retain many others!

Furthermore, I believe that the expression used by the EC President also aimed at avoiding ruffling one side or another, the supporters or the opponents of a deeper integration. It showed up in his speech, when he said that “this is about the Union with the Member States, not against the Member States”.

I will express only one reservation about the expression “federation of nation States”: I hope it does not mean an abandonment of the idea of “European identity. This identity is added to the national and/or local one, it does not replace them. J. M. Barroso rightly says that there are citizens who are “proud of their nations but also proud to be European and proud of our European values”.

Implementing this new degree of integration requires, of course, changing the EU treaties. But, as stated by the EC President, this “must not distract or delay us from doing what can and must be done already today”. According to him, we must not start by changing the treaties, though Germany staunchly supports such a move.

About the method, J. M. Barroso advocates “a broad debate all over Europe” before convoking a convention and an intergovernmental conference (IGC). Indeed, according to his own words, “Europe cannot be technocratic, bureaucratic or even diplomatic. Europe has to be ever more democratic.”

José Manuel Barroso also stressed the fact that it was “not just a debate for the Euro area in its present membership” and that “this project should remain open to all Member States”. So, a multi­-speed Europe shall not create new “walls dividing [it]”. Nevertheless, “no one will be forced to come along” and “no one will be forced to stay out”; “the speed will not be dictated by the slowest or the most reluctant”.

In order to preserve as much as possible the integrity of the common market and of the EU, J. M. Barroso declared that “there is only one European Union” that must be developed basing on the current institutions and the Community method.

I agree with this approach. Of course, a multi-speed Europe is inevitable, but it must not be the final state and must not impair the objective of an ever closer union among all its members. All States cannot or do not want to follow the integration path at the same speed, but it must remain temporary!

Conclusion. Keyword n°11: Realism

Let us finish our reading of José Manuel Barroso’s speech with the question he asked himself: is this realistic?

Facing the pessimism and scepticism of a part of the population and the elects, he answered that “it is this [current] reality that is not realistic” and that “cannot go on”.

We cannot continue like in the past years, we must change. And the most realistic change is the one that “makes us stronger and more united”. The EC President urged his listeners to give a message of hope and to be proud of what we are, of our values, of our social model, of our culture, of our prosperity. As he stated, “previous generations have overcome bigger challenges. Now, it is for this generation to show that they are up to the task. […] The European Union was built to guarantee peace. Today, this means making our Union fit to meet the challenges of globalisation.”

Pierre-Antoine KLETHI

PS: You can access the full speech by clicking here and the video here.

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