Meet Europe’s leader of last resort
Published in Business Spectator (Melbourne), 13 September 2012
Visitors to the EU quarter in Brussels are currently greeted by a giant poster on the façade of the Berlaymont building, the EU’s head office. Proclaiming more economic and political union for the EU, it stands in marked contrast to the constant signs of disunion and conflict on display across Europe. But that’s not the only thing in Europe that has an Orwellian flavour.
The euro crisis is not just an economic watershed for the continent; it is redefining European democracy. The language used by European politicians and central bankers is telling.
When ECB president Mario Draghi announced that he would be defending the euro with unlimited bond purchases, he did not sound like a central banker concerned with price stability but like a politician. He had no problems with telling European governments and parliaments what to do in return for his bank’s support. Draghi, the central banker, had morphed into Draghi, the fiscal ruler.
The ECB now occupies a bizarre position in the pseudo-democracy of the EU. On the one hand, it has the power to compel struggling countries to implement austerity policies, cut their welfare states, reform their labour markets and change their tax systems. On the other, it effectively forces the stronger economies of Europe into a de facto liability union as all the ECB’s risky bond purchases are ultimately underwritten by the taxpayers of countries such as Germany, Luxembourg and Finland.
The ECB does not have a mandate for either of these tasks. It was never meant to overrule national policies or enforce economic reforms. Nor was it designed as a tool of pan-European public debt pooling either. Draghi may wrap the bank’s changed character in the language of central bankers by alluding to an allegedly broken monetary transmission mechanism, but it has certainly become a political arm of the euro establishment.
Economists generally agree that central banks should be given independence so that they can pursue their core task of ensuring price stability. However, central bank independence does not and should not mean that central banks can indirectly determine the course of fiscal policy. In doing so, the ECB has put itself into the position normally occupied by elected lawmakers and governments.
Democracy in Europe is on the way out, not just through the self-coronation of Mario Draghi as Europe’s leader of last resort. His compatriot Mario Monti, the Italian prime minister, has also contributed his ideas to the redefinition of liberal democracy.
A few weeks ago, Monti gave a long interview to German newsmagazine Der Spiegel. It contained an insight into Monti’s understanding of democracy when he explained that it was every government’s task to discipline its parliament. It was a novel addition to democratic theory because usually it is the other way around.
But what would Monti know about democratic processes? He has never been elected to any of his political jobs but always appointed. When he was made a European commissioner, at least he was nominated by the then Italian government. To his current job as prime minister of Italy, however, he was effectively appointed by France and Germany when they conspired to oust his predecessor Silvio Berlusconi.
In Europe’s democracy, Monti has replaced Montesquieu. No longer are the separation of power and democratic process hallmarks of the political systems. Instead, the elites are running the show, and do not tolerate opposition.
At a joint press conference with EU president Herman van Rompuy, also an unelected figure, Monti suggested calling a special summit to deal with ‘anti-European populism’. What he refers to are those that disagree with the way the European Union is developing.
Judging by the results of the latest Euro barometer survey, Monti’s anti-populism summit would face a massive task. Only 31 per cent of all Europeans tend to have trust in the EU’s institutions – an all-time low. Given this widespread public distrust in the EU, it is surprising that there are so few outspoken EU critics in European politics. The majority of European parties still stand behind the European integration project.
Instead of asking himself why Europeans have become so critical of and sceptical about the EU, Monti does everything to confirm their misgivings by calling for his anti-populism summit. There is more than just a Soviet whiff about an unelected politician confronting criticism by calling a special summit about it. It also shows the arrogance of Europe’s political class and their complete disrespect for voters and their wishes.
Just as Draghi makes his power grab sound like monetary prudence, Monti dresses his authoritarian demands in the colourful language of European integration and cooperation. But it cannot disguise the fact that what he is actually demanding is a departure from liberal democracy.
The European Union’s democratic deficit has become as deep as the continent’s fiscal deficit. And just like the fiscal deficit poisons Europe’s economy, the democratic deficit is undermining the very foundations the EU was once built upon: the rule of law, liberalism, pluralism, and the separation of powers.
In the European Union, criticism is denounced as populism, recklessness is called prudence, and disunion becomes integration. It is hard not to be reminded of Orwell’s Ministry of Truth when seeing the façade of the Berlaymont building.