The multi-faceted measures adopted by the European Union and its Member States to tackle the financial and economic crisis have given rise to a wide range of academic literature, including from legal scholars. The latter have investigated not only the technical aspects of the several reforms carried out, but also, more generally, the shortcomings of the Economic and Monetary Union (EMU) and its evolution throughout the crisis. Often, this sort of analyses also include a wider reflection on the current status of the European integration process, in an attempt to find a way to overcome its current impasse.

Alicia Hinarejos has recently added to this scholarship with a book that is welcome for at least two reasons: first, because it provides a clear and comprehensive analysis of the impact of the crisis (and its institutional responses) on the EU constitutional set-up. Second, and perhaps more importantly, because the volume develops an in-depth thought on the future of EMU and its prospective relations with the EU as a whole.

An asymmetric EMU

The first part of the book sets the scene, so to speak, by briefly illustrating the history of the EMU, the euro area crisis, and the main measures with which the EU has responded to the latter (Chapters 1 to 3). The structure of the EMU is defined by Hinarejos as “asymmetric”, in line with the observation that while the euro area’s monetary policy is centralized, economic policy remains essentially in the hands of the Member States. The author connects the weakness of the “E” in EMU, inter alia, to the EU’s limited competences in this field, and its legal inability to conduct independent economic or fiscal policies.

Said asymmetry made it difficult to address the problems experienced by some Eurozone Member States efficiently. Hinarejos critically assesses the main interventions in this direction, both at the EU level and through international law instruments, namely: the actions taken by the European Central Bank (ECB), through an evolving interpretation of its role; the various mechanisms of financial assistance providing financial support to Member States in difficulty; the strengthening of budgetary surveillance and economic coordination measures (e.g. the Six-Pack and Two-Pack, the European Semester, the Euro Plus Pact, and the Fiscal Compact); finally, reforms in the financial sector, most notably the banking union.

While the definition of EU-level fiscal rules has been strongly pursued by the Member States over the last few years (although these rules have been infringed several times), this is not the case for (centralized) fiscal and economic policy decisions.

All in all, the overview provided in these first three chapters is extremely concise, which is a plus for readers interested in forming a general idea of the measures put in place as a result of the euro crisis. At the same time, this part of the volume leaves a number of questions about the specific features of these measures open.

The evolution of EMU during the crisis

Chapters 4 and 5 focus on the shift in the initial arrangements and assumptions underlying the EMU, with particular reference to the principles governing it (Ch. 4) and to the effects of said shift on issues of competence and social policy (Ch. 5). In the author’s view, an EMU-like system has to cope with three main challenges: first, enforcing fiscal discipline and avoiding moral hazard, i.e. opportunistic conduct based on the assumption that each state will be bailed out if it runs into trouble; second, addressing structural imbalances or structural inequalities among national economies; finally, countering asymmetric shocks. The crisis has had important consequences for the way in which the EMU tackles these challenges, transforming it from a pure rule-based system to a more complex entity.

The EMU’s evolution, however, is far from complete. While the definition of EU-level fiscal rules has been strongly pursued by the Member States over the last few years (although these rules have been infringed several times), this is not the case for (centralized) fiscal and economic policy decisions. Hinarejos points out that, especially in this field, policy choices made centrally would be particularly sensitive, as they are redistributive in nature, and therefore involve the direct allocation of national resources. Such a development would imply a higher level of integration, and above all “greater democratic legitimacy than the enforcement of pre-agreed numerical fiscal rules” (p. 69).

Differentiated integration can be pursued both within the EU framework and through international agreements, like the treaty establishing the European Stability Mechanism. In either case, the growing cleavage between euro and non-euro countries raises a number of problems, as regards, for instance, the role of the common institutions, primarily the European Parliament.

Recently, the EMU has also been characterized by a growing recourse to “new governance techniques” or soft law instruments, sometimes combined with hard law elements, as is the case, for instance, of the European Semester. These mechanisms, however, are unable to radically affect the competence boundaries between the EU and its Member States in the economic policy area: as Hinarejos puts it, “[t]he dilemma facing the Union is how to adopt effective action without being able to pursue its classic brand of integration through law and without straying beyond the boundaries of Treaty competence” (p. 78).

Intergovernmentalism, multi-speed integration, and judicial review

Chapters 6 to 8 provide reflections on some key issues arising from the main developments that have affected the EU and its Member States during the crisis. The first reflection concerns the “resurgence of intergovernmentalism”, understood as the adoption of decisions by the Member States without the involvement of supranational institutions, or in any case without the adoption of the so-called Community method. Hinarejos investigates the consequences of this trend for democratic control, on the one hand, and for judicial control, on the other. Her conclusion is that these transformations create several concerns, making it necessary—or at least desirable—to reform the EMU and the EU comprehensively in the area of economic and fiscal policy.

Chapter 7 concentrates on multi-speed integration, which is not only one of the principles underlying several anti-crisis measures adopted over the last few years, but also a possible way to (further) strengthen the integration among Eurozone members. Differentiated integration can be pursued both within the EU framework and through international agreements, like the treaty establishing the European Stability Mechanism. In either case, the growing cleavage between euro and non-euro countries raises a number of problems, as regards, for instance, the role of the common institutions, primarily the European Parliament. In the long term, according to Hinarejos, “it will be difficult, if not impossible, to reconcile very deep economic and political reforms in the euro area with an unchanged larger Union” (p. 119).

Chapter 8 scrutinises the role played by the European Court of Justice (ECJ) and some national courts in the review of anti-crisis measures. This is one of the most interesting parts of the book: the analysis of major judicial decisions is accompanied by reflections on the relations between the ECJ and national courts, as well as—more generally—between judicial and political actors. Besides the seminal Pringle ruling, and the OMT preliminary reference from the German Constitutional Court (which had not yet been answered by the ECJ at the time of publication of the book), the author critically examines the ECJ’s decisions concerning the “Memoranda of Understanding” (MoUs), i.e. the agreements negotiated between the so-called Troika and Member States in need of financial assistance. These agreements, as anticipated, have a worrying impact on citizens’ social rights.

In essence, the ECJ, as well as the General Court of the EU, has always denied having jurisdiction on this matter, also excluding any applicability of the Charter of Fundamental Rights of the EU to MoUs and to national measures taken pursuant to them. Hinarejos disagrees with this case law: while the approach adopted by the Court may be understandable with reference to emergency measures, the rejection of any link with EU law does not seem sustainable in the longer term, giving rise to a gap in judicial protection. Moreover, the judicial restraint on the scope of the Charter seems inconsistent with its extensive interpretation in other cases (see, e.g., Åkerberg Fransson). In this respect, the author observes that “[a] more coherent approach may be for the Court to admit a link to EU law, and then exercise restraint when it comes to the review of measures, if appropriate” (pp. 135-6). As to the merits of the cases, in fact, it could be difficult for the ECJ to give a decision on national instances aimed at modifying the balance between social rights and economic stability in the framework of MoUs.

The book then analyses the decisions of some national courts concerning anti-crisis measures. This part of the research is exposed in a very condensed form, leaving the reader a bit puzzled by the number of national decisions which are simply mentioned, without further discussion. In the same vein, no judgment of the European Court of Human Rights is cited, although the (very timid) revision of national measures carried out by the latter could have enriched the (still interesting) overview provided by the author.

Looking ahead: The future of EMU

The last part of the monograph looks at the future of the EMU, addressing in particular the constitutional obstacles to the achievement of a full economic and fiscal union (Ch. 9), and some possible models of further integration (Ch. 10). A first unavoidable question is whether the EMU should become a fully fledged economic and fiscal union and to what extent this would require a full political union as well. Such a transformation of the EMU would need, undeniably, an enormous transfer of power to the centre, in view of the overarching nature of economic policy “which, broadly understood, can cover or at least substantially affect virtually every area of human activity” (p. 156).

The constitutional obstacles examined range from vertical allocation of competences to democratic legitimacy. With respect to the latter, Hinarejos highlights significant problems arising, in addition to the ones linked to the classic EU’s democratic deficit. An interesting reflection is then devoted to the issue of financial solidarity, an element that should be necessary in a more integrated Eurozone. According to the author, however, the enforcement of this principle, as well as any further development of the EMU, could result in claims on the part of national constitutional courts, which would probably be vocal on the respect of national constitutional identities. Another major obstacle would be the growing difficulty to reconcile “the core and the periphery” (p. 177), by reason of the mismatch between membership of the euro area and of the wider Union.

As to the ways to strengthen fiscal integration, Hinarejos outlines two main models: the “surveillance model”, in which Member States continue to have full fiscal competence, while the EU has a role of “discipline enforcer”, and the “classic fiscal federalism model”, in which the EU acquires an independent sphere of fiscal authority, being able to pursue macroeconomic stabilization. The thought-provoking point made by the author is that a full implementation of the former model poses the same threats to Member States’ autonomy, and the same problems concerning democratic legitimacy, as the latter model. For this reason, a probably underestimated danger is that, “in an effort to avoid the radical changes that come with a classic fiscal federalism model, the euro area may be slowly edging towards the surveillance model […] without the necessary awareness and debate” (p. 190). This argument can be related to the paradox which, according to Federico Fabbrini, emerges from a comparison between the EU and the US with reference to budgetary affairs, the first system being, surprisingly, more centralised than the second.

The author’s conclusions are not very optimistic, for the enormous difficulties in articulating a system of fiscal federalism within the EU make it difficult to envisage, at present, such an evolution for the monetary union.

Finally, the last paragraph carries out an analysis of the proposals put forward for reforming the EMU, both at the institutional level and in the academic or political literature. The aim here is to evaluate to what extent these proposals are feasible, and how much of them has already been (at least partially) realized. The author’s conclusions are not very optimistic, for the enormous difficulties in articulating a system of fiscal federalism within the EU make it difficult to envisage, at present, such an evolution for the monetary union. In spite of being more desirable and coherent, this model of further integration presupposes a stronger political discussion and engagement on the part of Member States, which does not currently seem to be taking place.

One ends reading Hinarejos’s book with more questions than answers in mind. This does not mean that the analysis is not clear and thorough. Quite the contrary, the monograph is stimulating and provides valuable food for thought, giving input to further research questions. The main ideas underlying the volume are reiterated several times, which helps the reader to sum up, but sometimes feels a little redundant. On the other hand, the author’s ability to summarize complex and technical issues, in order to focus on their constitutional implications, can be useful for readers who are not too familiar with EU law, while being occasionally unsatisfactory for EU lawyers aiming to fully understand the legal side of anti-crisis measures. Nevertheless, the book is an important contribution to the scholarship on the constitutional aspects of the euro crisis, and to the debate on the future prospects of EMU.


Photo Credits CC: Kathleen Tyler Conklin



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INTELLECTUAL EUROPE REVIEW


Alicia Hinarejos, The Euro Area Crisis in Constitutional Perspective. Oxford: Oxford University Press, 2015


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