Listen to this article

00:00
00:00

Exactly 10 years ago, a small group of wise men finished drafting an influential think piece on the future of Europe.

The Laeken Declaration was tweaked (well, diluted) and endorsed by the European Council, under the chairmanship of Belgian prime minister Guy Verhofstadt, in December 2001. It set up the constitutional convention under Valéry Giscard d’Estaing and triggered the long and contorted process which led, eventually, to the Treaty of Lisbon in December 2009.

Ten years ago the European Union was in trouble. The Treaty of Nice, not yet in force, was already known to be inadequate for the challenge of the likely enlargement of EU membership to countries of central and eastern Europe. Growth had slumped to 2 per cent of gross domestic product. The European Commission of Romano Prodi was not seen to be an effective engine of integration. Persistent disagreements about economic and fiscal policy between German chancellor Gerhard Schröder and French President Jaques Chirac perturbed the first years of the euro. Britain’s then prime minister Tony Blair had already abandoned his early pro-European promise.

In the end, Lisbon succeeded in answering many of the questions posed at Laeken, if only partially – and several key questions remain relevant today: “How can economic policy co-ordination be stepped up?”; “How can the authority and efficiency of the Commission be enhanced?”; “Is there a need for more decisions by a qualified majority?”; “What is the future role of the European parliament?”; and “Should a European electoral constituency be created?”

The Lisbon treaty left untouched the arrangements for economic and monetary union which date back over 20 years to the Treaty of Maastricht. It is those arrangements that are being tested to destruction by the current liquidity and solvency crises.

The EU institutions have legislated nobly to close the stable door after the horse has bolted. But all efforts to stabilise the markets have been in vain. Crisis management has been poor and panicky, particularly at the top level.

Since the collapse of Lehman Brothers in 2008 there have been 21 multilateral meetings of heads of EU governments and numerous bilateral ones. Most of these summits have developed more and more complex proposals for salvage measures that have still to see the light of day. Instead of resolving the crisis they have compounded it. Weak leadership and inadequate institutions have destroyed market and democratic confidence. Only the European Central Bank has survived with its reputation for independence enhanced, quietly doing the famous “whatever it takes” to fight the fire.

Everyone knows that vital political decisions are needed at this week’s European Council. Options for the short term are limited: as George Soros told a recent meeting of the European Council on Foreign Relations, “the short term has already begun”. In the short term, the ECB is now the only institution left standing and Mario Draghi, its new boss, is exactly the right man to free up the bank’s potential from monetary uber-orthodoxy.

Lashings of money now will help, of course, but they will not restore market and democratic confidence in the euro’s long-term future. Indeed, if the bank is having to act beyond the limits of its constitutional mandate one decision of the European Council this week must be to rectify the legal situation via treaty change as soon as possible.

The marketeers are not just money men: they have political opinions too, and they are beginning to understand EU politics only too well. Finance and business see more clearly than many politicians the deep interdependence of Europe’s fractured national economies. What the markets crave is clarity, simplicity and legality – all of which can be provided by using the EU treaties and institutions.

Unfortunately, this revelation has not hit President Nicolas Sarkozy who still pursues the traditional Gaullist campaign against a federal Europe. His speech in Toulon on Thursday was as preposterous as it was clearly confusing to his audience of party faithful. Nothing for the markets; no reference to the EU institutions; no solidarity with other member states: Mr Sarkozy indulges in the desperate hope that German generosity will save France’s triple-A status and his own electoral bacon.

The catastrophe which is French European policy cannot be overstated (and is rivalled only by Britain’s). When we had the right to hope from Mr Sarkozy for a declaration of European interdependence, we got instead a futile reiteration of the failed recipe of inter-governmental summitry run by the Berlin-Paris axis.

Amid banalities about “la refondation de l’Europe”, Mr Sarkozy made one radical proposal: that the European Council should have supremacy over the whole EU system and should no longer take decisions by consensus but by qualified majority vote. This ruse would destroy at a stroke the delicate inter-institutional balance of powers in the Union; it would marginalise the smaller countries, relegate the European parliament and reduce the Commission to the role of secretariat. Mr Sarkozy’s plan would effectively install a permanent directory of Franco-German leaders to run the union.

The proposal is so absurd that it has no chance of success. We are fortunate to have in power at least two prime ministers, in Mario Monti of Italy and Donald Tusk of Poland, who are well prepared to stop such nonsense. As will José Manuel Barroso, president of the European Commission.

Angela Merkel is doing her best, but almost certainly in vain, to concoct an agreement with Mr Sarkozy on serious proposals to put to their colleagues at the end of the week. Yet only proposals that build upon the legal treaty basis of the EU will secure the support of others. Only proposals which garner support will secure the confidence of the markets and citizens. Only a further pooling of sovereignty in what Mr Draghi calls a “fiscal compact” will now salvage the euro and save the EU from self-destructing.

Germany, too, must move – and its government, parliament and court must move together. The German leadership knows that the future of the eurozone is only to be secured by fiscal integration, and that if the new fiscal union is to work it has to be democratic. Fiscal solidarity between taxpayers requires political solidarity between electors. Europe needs a democratic economic government not just to gratify federalist militants but also to satisfy the markets. The chancellor should say this.

Her problem is that the mutualisation of sovereign debt implied in fiscal union requires not only revision of the EU treaties but also changes to the German Basic Law and to some other national constitutions. That is why Mrs Merkel is apprehensive at talk of eurobonds now, preferring at this stage to have limited treaty change and to make greater efforts to use the enhanced co-operation clauses of Lisbon. She is right, at least, on the latter point: more could be done to turn the Eurogroup into a more effective motor of integration, drawing in all member states who wish eventually to join the single currency.

But the chancellor is wrong to duck the issue of eurobonds. The Commission’s green paper on the feasibility of eurobonds and the proposals of the five German economists and Brussels think-tanks are very much worthy of serious debate. The intellectual ground is fertile.

The mechanism for conducting that debate is laid down in the Lisbon treaty: it is for another constitutional convention to be called, 10 years after the last, to consider the new fiscal model for Europe, how to combine stability and growth, how to balance discipline with solidarity, and how to constitute a legitimate economic government. This week the EU must agree on such a serious prospectus for change.

Who knows, if tackled well, the new convention might even be able to address the ultimate unanswered question of Laeken, which was whether a reformed European polity should have its own constitutional text. What might the basic features of such a constitution be?

Andrew Duff’ MEP is president of the Union of European Federalists. His proposals for a convention agenda are available at www.andrewduff.eu and www.federalists.eu

Copyright The Financial Times Limited 2017. All rights reserved.
myFT

Follow the topics mentioned in this article