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Monday, February 13, 2012

Democracy and transparency remain the biggest victims of the euro crisis

Over on the Telegraph blog, we argue:

The 80,000 Greeks that came out in Athens yesterday to protest the latest round of bailout austerity imposed by EU-ECB-IMF troika can shout all they want. They can even express their disgust at the polling booths in the country’s general elections, scheduled for April. It won’t make much difference. To get its second bailout, the leaders of Greece’s main political parties are required to submit a written commitment to fully implement the package regardless of who wins the elections in April.

Everyone recognises that Greece needs fundamental reform – the country has for too long epitomised reckless economic behaviour. But as Andreas Vosskuhle, the heavyweight President of the German Constitutional Court, said in a recent speech: “It would be tragic and fatal if we were to lose democracy on the road to saving the euro.” Beyond everything else, this is the central dilemma the eurozone faces: necessary economic reforms are constantly pitted against basic democratic principles.

The demand for a written assurance to stick to the austerity plan in Greece is only one in a series of direct assaults on democracy, accountability and transparency that have followed in the wake of the eurozone crisis, including:

The technocratic regimes in Italy and Greece: Berlusconi was hopeless and Mario Monti has given Italy a boost, but the replacement of elected governments in Greece and Italy – under heavy pressure from eurozone leaders – with unelected technocratic regimes, has left a very bad taste. This was unintentionally summed up by the President of the European Council, Herman Van Rompuy, when he remarked in a recent speech that “Italy needs reforms, not elections".

This a practical issue too: reforms decided by technocrats without a proper popular mandate are less likely to be implemented and to stand the test of time.

An EU ‘budget-veto’ commissioner: A leaked German/Dutch plan would see the creation of a Commissioner, with the power to veto the budgets of poorer eurozone states – the proposal instantly drew a barrage of criticism and looks to be a step too far a the moment.

Central banks dictating economic policy: In August last year, the ECB sent an absolutely extraordinary letter to Berlusconi’s government, setting out a range of prescriptive reforms, including changes to the Italian Constitution, that Rome needed to enact in return for the ECB agreeing to buy Italian government bonds. These demands, which were only revealed months afterwards through leaks, appeared to have become government policy.

“Dark, secret rooms”: Symptomatic of the crisis, Eurogroup Chairman Jean-Claude Juncker suggested last year that eurozone meetings should take place in “dark, secret rooms” to avoid market speculation, admitting that he often “had to lie” during his career. In creditor and debtor countries alike, elected MPs are becoming increasingly frustrated at playing second fiddle.

Reduced insight for citizens: Citizens are left in the dark too. The opaqueness has even spread to traditional pro-transparency, non-euro countries such as Denmark. Since the eurozone crisis erupted, the website of the Danish parliament no longer publishes draft minutes of upcoming European Council summits – a great service which used to grant citizens insight. No explanation is given except for bilaget er fortroligt (the document is confidential).

The secrecy of the fiscal compact: negotiations on the much-hyped euro fiscal compact have equally been shrouded in great secrecy and the legality of key aspects of the document remains dubious.

The ECB’s mysterious balance-sheet: Apart from complaints in Germany that it’s engaging in illegal state financing (against promises made to German citizens), the ECB doesn’t publish any break-down of their bond purchases (not even with a time lag), nor any information about where the bonds they hold lay on the balance sheet. As the bond-buying amounts to a hidden, and growing, cost of the crisis to eurozone taxpayers, this begs the question: who, exactly, is accountable for these decisions?

And the list can be made much, much longer. As some are keen to point out, as all of this is happening under the auspices of (mostly) elected governments, it’s perfectly consistent with democracy. But even if that is true, the eurozone elite continues to test the limits of democracy at its own peril. If policies remain the same irrespective of who’s in power, sooner or later, voters will look to other, and far more unpleasant, alternatives.


Rik said...

A lot of the measures are as such understandable, seen the situation, the problem is that voters have not been given the right to vote on it.

The Commissioner for Greece (or something similar) is a reasonable demand by a creditor from a totally unreliable debtor. The problem here is the timing. Measures and after that an election. The otherway around would be the democratic way.

Imho the EU/EZ makes a huge mistake on this point. If a majority of the Greek voters is not more or less structurally for these measures it will not hold. Greece needs at least a decade as it looks now to stabilise things, which means 3-4 elections at least. No way the existing political parties will survive that. Some of them are already as popular as the plague with the rest likely to follow (the likely new PM has brought his saving to Belgium for instance).
And what would be wrong after Berlusconi left to have an election in which the major parties say that a technocrat government would take over for the next term.

Another issue is the ECB. It is becoming heavily politicised. An unelected body should have a clear task and not sit on the government's chair. So from a democratic perspective basically control inflation and regulate banks and work as lender of last resort for the healthy ones. And that is it. A technical task and trying to avoid that politicians try to use certain possibilities for mostly short term gain.

The problem of it all is that as with Greece this will take a decade or more. With in all countries 3-4 sometimes more important elections. It is already difficult to sell more or less unavoidable measures in the countries that receive money, it simply cannot be solved longer term (which is necessary) in the paying countries at least not in a lot of them. Especially when guarantees for Greece become actual money to be paid for Greece. Leading to most likely cuts in services to the local population (as actual payments are budgetitems and guarantees are not).
Not many countries need to put a stop to it before the whole house of cards collapses.

Canutely King said...

Apart from Papademos all the Ministers in the Greek Government were elected in the 2009 elections. Papademos was elected by a majority of Greek Parliamentarians after he was nominated by the Greek President when Papandreou resigned.

Mario Monti was elected by the Italian Parliament after he was nominated by the Italian President when Berlusconi resigned. All the Ministers in the Italian government were elected by the Italian Parliament after being nominated by Monti.

To bracket them as being similarly technocratic is utter nonsense.

Anonymous said...

@Canutely King

Don't get too excited about it :)

This is Open Europe afterall, heavily biased towards westminster.

Perhaps Open Europe should put things in perspective: how many UK citizens had the opportunity to vote for the would be PM, Mr. Cameron? Constituency of witney is very small compared to the total electorate of the UK isn't it :)

On the euro crisis than: Greece remains completely sovereign. The 'demands' of the eurozone/ECB/whatever are just a quid pro quo. Greece cannot expect to get billions for free can it? It still is sovereign to decide whether it wants help or whether it wants to leave the eurozone.

Andrew Smith said...