Unaccountable Europe

For almost five years Margrethe Vestager has been the EU Commissioner for Competition and officially responsible for dealing with cartel brotherhoods and monopolists from all over the world. The Danish politician really does a good job. Since taking office, she has imposed more than 15 billion euros in antitrust fines, almost twice as much as her predecessor, thereby doing Europe’s consumers a service that is worth all the more because it depresses prices. Vestager imposed 4.4 billion euros in fines on Google alone last year. She has also taken action against the governments in Ireland and the Netherlands; states which help tax avoidance for global corporations. As a result, the Irish Ministry of Finance collected 13 billion euros in taxes from Apple. And that was just one case of many.

Nor does the contentious Dane shy away from tackling the governments of the large Member States, France and Germany. Against the will of President Macron and Chancellor Merkel, she has banned the planned merger of the railway divisions of Alsthom and Siemens. Rightly so. If not, consumers and taxpayers would have faced fare increases to cover the acquisition of new trains and signalling technology.

So, Vestager has exactly what it takes to be a good European in office: she fights for the European common good, regardless of individual national interests. In fact, that makes her an ideal candidate for the top position in the EU Commission. If EU citizens ever had the choice, she would certainly stand a good chance of succeeding Jean-Claude Juncker as Commission President.

But we don’t have that choice. We will indeed elect a new EU Parliament this weekend. But that doesn’t mean that we, the Union’s electorate, are deciding who will run the EU Commission. First and foremost, it is the heads of government of the EU Member States who decide. Parliament can then only approve or reject it. Danish Prime Minister Rasmussen has already said, however, that he will not allow Ms Vestager to continue in her previous job, let alone become President of the Commission. One of Europe’s best is therefore likely to lose her office. And even if she does somehow secure the top job – perhaps because Merkel and Macron will have accepted her as a compromise candidate – it is not because we the electorate will have wanted it that way, but because she fits into the power games of Europe’s heads of government.

Democracy out of power

Already, this example shows the leaders of the European Union guide democracy in name only. In practice, they constantly override it and violate fundamental democratic norms on a grand scale. Some people might think this is a bit thick, even totally exaggerated. I would be happy if this were the case. But anyone who follows the passage of legislation in the EU, and in particular the means by which monetary union is controlled, must come to the same conclusion.

This is by no means the fault of the “bureaucrats in Brussels”, as the saying goes. The EU administration is relatively small, with 15,000 officials and 28 Commissioners. The city of Hamburg alone has four times as many civil servants. And the procedures in the Commission are largely transparent. Almost all meetings of leading officials and commissioners with lobbyists of any kind are recorded in a public register. Most internal documents are also accessible on request. The legislative proposals developed by civil servants often serve certain industry interests. But that only reflects what is also common on a national level.

No, the real scandal is the anti-democratic practices in the Council of the EU, also known as the Council of Ministers. These are not just the rounds of talks involving heads of government or ministers like we see on television. The actual work takes place in approximately 150 working groups and in the Council of Permanent Representatives. This is where officials from national ministries of the 28 (perhaps soon the 27) meet to discuss the legislative proposals presented to them by the European Commission. These negotiations take place entirely in camera. There are no publicly accessible minutes, and the press has no right to know which government actually represents what position in the meetings. For citizens, Europe’s most powerful legislator is de facto a black box. This is dangerous and makes legislation highly vulnerable to the influence of well-organised economic interests. It also enables crooked deal-making in which individual governments assert their national interests before the European common good.

I witnessed this in the years of tug-of-war over the anti-money laundering law. Wolfgang Schäuble, then still Germany’s Finance Minister, maintained strongly that Europe had to take a “leading role” in order to prevent criminals and dirty money owners from laundering their illegally acquired assets through shell companies. However, during the negotiations in the relevant Council working group, it was the representative of Germany who opposed the central reform proposal: a Europe-wide obligation to name the so-called beneficial owners of each company in a public register. If this were actually implemented across the EU, it would be the end of mailbox companies and the police could get on the trail of criminals and tax evaders and their money.

But the dirty money business is so lucrative for German banking and the real estate industry that the Federal Ministry of Finance would rather side with them than with its own tax investigators and criminal investigators. While Spain, France, Italy and even Great Britain were in favour, it was the Federal Government of Germany, of all countries, that for years had been taking the side of tax avoidance supporters from the Netherlands, Luxembourg and Austria. The role of the Germans only came out because an official passed the secret Council meeting minutes to a parliamentarian, who then gave them to me. In the end the mandatory register became law, but it was delayed by a full five years because of the blocking minority in the Council, led by the Germans. And then the implementation of the directive in German law was designed with absurd loopholes, which makes the register worthless.

National governments as gateway for lobbyism

This episode is not alone. The Corporate Europe Observatory Initiative, one of the best NGOs in Brussels, comprehensively documented this in February this year in a shocking report which reveals the Brussels representations of national governments as gateways par excellence to assert secretly the interests of individual sectors and companies, whether it is by diluting proposed legislation or simply blocking it by means of a blocking minority. A noteworthy victim of this strategy is the financial transaction tax, a proposed sales tax on all transactions in securities. The purpose of the legislation is clear: not only would the financial sector be bound finally to shoulder some of the costs it caused with the crash of 2008, but taxes of a half to one percent of the trillion-euro turnover on stock and derivatives exchanges would also throw sand into the gears of excessive speculation on interest rates and currency derivatives. After the Lehman Brothers crash everyone was in favour except the British. The EU Commission even presented a well thought through bill on the subject. But then, by targeting governments in France and several small countries, the financial sector was able to postpone the entire project, demanding ever more restrictions. Now,10 years after the great reform promises of 2009, this project, which is important because it is fair, has de facto died.

No less important is the directive on e-Privacy proposed by the Commission. This is intended to ensure that data and media groups no longer record what users search for, read or buy on the internet without their consent. The groups’ data collection is the foundation for the billion-dollar business of Google, Facebook & co, with advertising tailored to individual consumers. A ban on data recording is needed if only because this targeted advertising is also used on a large scale to influence and manipulate voters. This was revealed by our colleague Carole Cadwalladr – a true heroine of our guild – through her reports on the scandal surrounding the use of Facebook data by Cambridge Analytica. The Brexit referendum may have turned out quite differently had it not been for the intervention of this now defunct company partly-owned by the US billionaire and right-wing extremist Robert Mercer. But negotiations on the e-Privacy Directive have been going on for two years now.

And according to reports, it is once again the German Federal Government which, under pressure from the digital industry, is resisting the introduction of a rule that citizens should be asked for their permission. Research in the magazine Netzpolitik has shown that the responsible Ministers of Economy and State Secretaries met with representatives of Google, Facebook, the Axel-Springer-Verlag and associated organisations no fewer than 32 times to make common cause against e-Privacy.

The list of self-serving interventions in European legislative proposals could continue long into the future. The British government helped the financial industry prevent hedge funds and private equity funds from being more tightly regulated. The Dutch government helped the food industry increase fishing quotas against all reason. And so on and so forth.

For such interventions, corporations and their associates have a unique lobbying power in Brussels. The financial industry alone employs around 1,700 lobbyists. That is four for every one EU official involved in one way or another in these issues. This costs the financial industry around 120 million euros a year, about 30 times more than trade unions, consumer and environmental organisations combined have at their disposal to lobby in Brussels on this issue. The logic behind this expensive expenditure on personnel is quite simple, as someone involved in it once explained to me: an effective limitation of risk in the financial sector could quickly cost it several hundred million euros in income annually. That is why it is always worth spending many millions on lawyers, consultants and agencies to throw sand into the works. The delay of reforms, even if only temporary, is absolutely worth it.

Blockade in EU Council of Ministers

A member of one of the many lobbying companies in Brussels told me how it works in practice. One of the most important tricks is to organise a blocking minority in the Council of Ministers. All you have to do is win over one of the big names like France, Germany, Italy or Poland along with a few smaller countries. Governments of the poorer EU countries are particularly vulnerable. It may be enough to hold out the prospect of a few investments in order to win over a Council representative. Of course, you can never prove a direct connection. There’s nothing in writing. But the voting behaviour in the Council sometimes makes very strange leaps. What these processes have in common is that they are completely non-transparent for citizens. A democratic, Europe-wide discourse often does not take place at all. This is not compatible with the rules of democracy. And this is not only my own personal opinion. None other than Emily O’Reilly, the Ombudsman of the EU, agrees: “The way the EU Council works undermines citizens’ right to hold their governments accountable,” she said in one of her carefully researched reports last year. This is expressed in the “disproportionate secrecy” of the proceedings in the Councils of Ministers and in their approximately 150 working groups. This makes it “practically impossible for citizens to follow the discussion of national representatives on legislation,” she said. So, it is quasi-official that Europe’s most powerful legislative body violates a central principle of democracy: the obligation to open, transparent legislation.

Behind this is the reluctance of national government officials to disclose to citizens their respective manoeuvres and positions in Council bodies. This has a very welcome advantage for those in power: they can always say ‘Brussels is to blame’ for controversial projects, even if they themselves and their own officials have been involved. But that is precisely what undermines the trust of the citizens. O’Reilly summed it up clearly: “This phenomenon nourishes doubts about the democratic legitimacy of the Union and promotes anti-European resentments,” she warned. Before the next European Parliament elections, the Council should therefore make all its negotiating documents publicly accessible so as to refute the arguments of right-wing populists and “reduce the alienation of citizens”. But the wheeler-dealers in European Council circles couldn’t care less. They simply ignored the demand.

The Eurogroup: the secret government

Nevertheless, what happens in Council meetings does at least follow the basic rules of EU Treaty. The Court of Auditors controls what laws do. Citizens and businesses can take legal action at the European Court of Justice in Luxembourg. And the EU Parliament at least has a final say in new laws, in tandem with the Council and after debate. Journalists and interested citizens can thus follow the legislation, at least indirectly.

But for one central, perhaps the most important, area of European policy, none of this process applies: monetary union and the regulation of the euro zone. The so-called Eurogroup, the finance ministers of the euro zone states, is the body that takes the decisions in these policy areas. The Eurogroup is a purely informal body with no legal basis whatsoever. There are no rules of procedure and no minutes of meetings. The sovereign debt crisis in the southern euro states and Ireland several years ago turned it into an anti-democratic monster.

This can be put down to the misconstruction of the euro. Euro Member States share a currency but manage their national budgets individually. This is what Article 125.1 of the EU Treaty, also known as the “Non-Assistance” clause, stands for. “The Union is not liable for the obligations of central governments”, it says, and the same applies to the Member States themselves. The founders of the euro, above all Germany’s then Chancellor Helmut Kohl, wanted to reassure critics predicting exactly the opposite. That is why there is still no common budget and consequently no common, democratically accountable governance of the euro zone. But because euro zone states operate individually on the capital markets, banks and funds can engage in speculation, targeting the more heavily indebted euro states by driving interest rates for the renewal of their government bonds so high that the warning of state bankruptcy becomes a self-fulfilling prophecy.

This is exactly what happened in the spring of 2010 in Greece and shortly afterwards in Ireland, Portugal and Spain. A default by one of these countries would have caused Europe’s banks to collapse, just two years after the Lehman Brothers crash. The banks had invested several hundred billion euros in these countries. In a mixture of panic and dilettantism, the rulers of the euro zone, led by German Chancellor Angela Merkel, therefore cooked-up an adventurous concept: they decided once more to save the banks, but citizens shouldn’t notice it. To this end, they founded a new state bank, which they later called the “European Stabilisation Mechanism”, or ESM for short. Through this they guaranteed the states concerned 400 billion euros in emergency loans to pay off their creditors. Without further ado, Merkel and her colleagues declared the bailout of the creditors as “solidarity” and “salvation”. And, although all the governments and investors of all the euro zone countries were jointly responsible for the misery, the creditor governments placed the entire burden of debt alone on the crisis-hit states. This was a strategic mistake and the worst attack on the European project since the founding of the EEC (see the Arte documentary “The Trail of the Troika”).

In the legal no man’s land beyond democracy

Without any public discourse and without even asking the European Parliament, in this Euroland way got a sort of government: the “Eurogroup”. This organ lives beyond democracy, in a legal no man’s land, as Transparency International found. Neither the state bank “ESM”, nor the euro zone Finance Ministers and their Troika of the European Central Bank, International Monetary Fund and European Commission officials, are accountable to any parliament. There are no public minutes of their meetings and even terrible mistakes, such as the brutal contraction of the Greek national health service, have no consequences for those responsible.

Even when it came to crooked deals that reeked of corruption, no prosecutor could investigate. The officials involved enjoy diplomatic immunity. It is true that all national parliaments had to approve the respective credit programmes. But all they could say was ‘yes’ or ‘no’. They could not change the policy imposed by the programmes.

The philosopher and renowned thought leader of European integration, Jürgen Habermas, called this regime “post-democratic executive federalism”. Ministers and EU officials make decisions about the lives of millions of people without even having to win a majority from the voters concerned. And by the right of the strong, the creditors, led by the German Federal Government and the then Finance Minister Wolfgang Schäuble, made the balancing of state budgets alone the pre-eminent maxim. The Eurogroup and its “Troikans” feel no responsibility for combating unemployment or poverty. Since then the euro zone regime has produced the opposite of the original intention: instead of uniting the “peoples of Europe” into an “ever closer union”, as promised by the EU Treaty, it has incited them against each other. In the countries hit by crisis, people see themselves trapped in a vicious circle of austerity and recession, imposed from outside. On the other hand, in the creditor countries citizens are rebelling against the use of taxpayers’ money for states whose economic misery they consider to be their own fault.

And no credible body exists ready to explain the obvious: that together member countries of the currency union have caused the aberration and only together can they overcome it. Instead, ministers and officials authorised by the Eurogroup execute the right of the strongest in a democracy-free area; that’s to say creditors against debtors and countries in surplus against countries in deficit.

This goes hand-in-hand with the imposition of an unsustainable economic concept for the entire monetary union: all Member States should follow the German model – reduce wages, increase exports and reduce government spending. In Germany’s crisis years, however, this only worked precisely because the other euro zone states did not follow the model, instead, supported by loans from Germany, fuelling the German economy with their imports. Applied to the Union as a whole, however, this leads to a race to the bottom and forces weaker countries into stagnation because of lack of demand.

Italy: the political time bomb for the euro

All this makes Italy in particular a political time bomb for the euro. For ten years now, interrupted only by the two years after the banking crash, governments in Italy have followed strictly the deficit rule, keeping its annual budget deficit to below three percent of GDP. However, as a result there has been a huge shortage of funds for urgently needed investment in infrastructure, education, science and technology, without which the country falls further and further behind. And the EU cannot provide effective aid for lack of sufficient budget. No wonder then that citizens revolted against a perceived dictate from Berlin and elected to government the unpredictable rebels of the Five-Star Movement and right-wing radical Lega Party.

Jürgen Habermas sees this as a pattern for the whole of Europe. “The deep disappointment that the EU in its current state lacks the capacity to act to counteract growing social inequality within and between the Member States is the underlying cause of political regression,” he writes.

“Right-wing populism is primarily due to the widespread perception that the EU lacks the political will to become capable of action.” And he warns: “A Euro-Union capable of action would be the only conceivable force against further destruction of our much-cited social model.” To this end, he says, the EU must be “equipped with competences and budgetary means to intervene against the further drift apart of the Member States”. Only in this way can “the economically and politically strongest members keep the broken promise of the single currency for convergent economic developments”.

That sounds utopian. But for a few months in 2017 it looked as if this vision could come true. Because with Emmanuel Macron in France, a President had entered the European stage like never before. He is the first EU leader to openly admit that the lack of democracy and the lack of a central authority capable of acting threaten the European project. In order to explain this, he even specifically travelled to Athens to give a revolutionary speech in the very place where democracy was invented.

Many citizens had turned their backs on European unification “because they were not heard”, he said. “That is why we Europeans must have the courage to rediscover the path of democracy”, and not “with technocrats” who negotiate treaties “secretly in the back room”. Instead, like Habermas, he called for a budget for the euro zone of “several percent of economic output”, that’s to say a multiple of the current EU budget, so that it can counter future economic crises with its own resources. This would require the election of a European Finance Minister and a Eurozone Parliament, as President Macron said, “to establish democratic accountability”.

None other than the French President confirms the anti-democratic character of the current Euro-regime. But as stirringly as Macron promoted the “new foundation” of Europe, Chancellor Merkel and her Social Democratic co-regents narrowly rejected all his plans. They only want to support an additional budget for investments of symbolic size. Worse still, Merkel and her supporters even pushed through that the crisis management of the euro zone should continue to be the responsibility of the unelected technocrats of the euro credit fund, the ESM (European Stability Mechanism), who are not accountable to any parliament. Nothing is to change in the constitution of the euro.

But do we not have a European Parliament? Would it not be the most noble task of elected parliamentarians to defend the fundamental democratic rights of their electorate? Could they not simply force governments to abide in Europe by rules that are completely self-evident at home?

Yes, they could. They have the formal power to do that. After all, they could block the budget. But they do not want that at all, at least not the majority. And that reveals the whole sad truth about this parliament. It is not really European. Rather, it is an assembly of delegates from national parties, who are elected only by voters nationally. As such, “the majority” in Europe ultimately acts only as an extended arm of the ruling parties in their home countries. And this, even after the elected MEPs have been turned frigid by the arrogance of the power of Merkel and her colleagues, as witnessed in the euro crisis.

A parliament that actually sees itself as the representative of all EU citizens would never have allowed this to happen. It would have prevented people from dying in Greece due to the shortage of medicines and doctors. For this is exactly what happened when the Eurogroup lender troika demanded Greece reduce its public health system by half. But only Greek MEPs have to answer to their citizens. None of the alleged Europeans in the European Parliament has to answer for that. They enjoy the fact that they can have a say in deciding final legislation, but also prefer to do so in camera. For when they negotiate with the Council this happens in a so-called trilogue (involving also the Commission), and no journalist or ordinary citizen is allowed to listen in.

Europe’s journey from the negotiation of affairs to the neoliberal agenda

If we put all this together, we come to an alarming conclusion: no country structured in the same way as the EU and the euro zone could ever become a member of the European Union itself. “So what?” you might ask. The EU is not a federal state, but merely a confederation of states that have given themselves common institutions. And the citizens don’t want it any other way either. One does not win elections with a demand for a United States of Europe. Consequently, governments must somehow get their act together. And that was not a major problem for the European Community in the first three decades. National economies were predominantly organised on a national basis. Governments could each govern for themselves, as they and their voters wanted. Beyond this they had to negotiate on common affairs and issues.

However, this concept has nothing to do with today’s Europe anymore. The radical market reforms of the 1990s fundamentally changed this: the European single market from 1993, and monetary union and the Euro from 1999. As a result, Europe’s economies are now extremely closely intertwined. Not only large corporations, but almost all companies are integrated in one way or another in European supply chains and sales organisations. “Made in Germany” or “Made in Italy” is highly suitable for marketing, but it has nothing to do with real life.

This merging of economic life has radical political consequences. All laws and rules governing the production of and trade in goods and services must apply EU-wide and must therefore be adopted EU-wide. No matter whether it concerns the registration of cars, packaging of food or distribution of securities; whether it concerns baby’s nappies, pesticides or the working conditions of truck drivers. None of it can be regulated by nation states alone any longer. In other words, the vast majority of legislation, which is crucial to the everyday lives of consumers and workers, does not take place in national parliaments, but at EU level.

This has all been long-known. But now, as the neo-nationalists are on the rise, it has to be explained over and over again. In this integrated Europe, we depend on each other for better or for worse, like it or not. Returning to the nation state is not a realistic option. And this is the central lesson of the seemingly endless battle over Brexit. The attempt to unravel economic integration resembles a U-turn on the motorway. Yes, technically it’s possible, but there’s a price to be paid in unemployment and poverty.

Why then do our governments hold on so firmly to the current system? Why do they go on like this, even though it is obviously undemocratic and completely ineffective?

I think there is only one answer to that: national apparatuses do not want to give up their power and would rather continue to settle everything among themselves. But this plays constantly into the hands of the right-wing populists, because they feed the poisonous illusion that the respective national interest can be pursued at the expense of others. In fact, the narrow-minded adherence of power-hungry national politicians and officials to an obsolete pattern only provides anti-Europeans with their strongest argument: in this Europe we citizens have nothing to say.

The slogan “take back control” actually originates from a deeply democratic impulse that was maliciously abused by the UK’s leave campaign. For this reason, anyone who really wants Europe to remain peaceful and to assert itself in the world must fight for European legislation finally to be democratised in such a way that citizens can understand and accept the EU and its institutions.

This would mean: the transfer of the Eurogroup and the ESM into regular institutions of the European Union; genuine European elections based on the one-person, one-vote principle, with Europe-wide lists of candidates, as proposed by President Macron; the election of the EU Commission by the parliament, irrespective of the national origin of candidates; and the right of initiative for the parliament, which means that members of the European Parliament must also be entitled to propose legislation also without the approval of the commission.

All of this seems utopian at present. But this is the direction we must take if we want to prevent Europe from returning to national insanity. And even if there is still a long way to go before such new constitutional steps for the EU are drafted, the most important prerequisite now – if only sufficient pressure could be brought to bear – can be enforced immediately and without the need to amend the EU Treaty: it is essential to put an end to secret legislation in the Council and Eurogroup. Because democracy is impossible without transparency.

Immanuel Kant once touched on this: “All actions related to the rights of other people whose maxim is not compatible with publicity [public airing] are wrong. Because a maxim that needs to be kept secret, and to which I cannot publicly confess without thereby provoking the resistance of all against my purpose… can derive from nowhere other than from injustice, which threatens everyone.”

That is as true today as it was when the German philosopher wrote it 224 years ago.

This articles was first published in Investigate Europe.