Europe’s burghers need a republic

Jean-Claude Juncker, the new European Union Commission president, is under fire over revelations that his home country of Luxembourg serves as a tax haven for multinational corporations. The leak of tax documents earlier this month mocks his promises to rein in corporate tax evasion and make policymaking more transparent. Beyond raising questions about Juncker’s integrity, the latest European flare-up illustrates the central contradictions at the heart of the European project: the enduring power of the member states and the uneven harmonization of their political, financial and economic policies. Europe cannot be half integrated and expect to administer an economic policy — or any other policies — that benefit all of its 28 members.

If the EU hopes to succeed in the 21st century, it has to become a genuine republic with clear structures, all-European democracy and a robust, two-chamber legislature. The alternative options — a monstrosity driven by competing national interests, as is the case today, or a centralized European super state — cannot solve Europe’s looming problems: the ongoing euro crisis, the rise of far left and far right parties, waning legitimacy in the eyes of EU citizens and the yawning democracy deficit. Left unaddressed, the contradictions between the forces of integration and national power could tear the EU asunder.

In 2008 the euro crisis hit the EU against the background of the U.S. banking crisis. EU’s weaker economies, such as Greece and Spain, which were loaded up with debt, came under intense pressure from the market for failing to finance their debt. The EU had no mechanisms or policies in place to address such imbalances before they became acute — or ways to defuse the crisis once it occurred. (By contrast, the U.S. is a monetary union in which the states cover for one another, should there be dire need, as it happens quite regularly.)

There is no better example than the euro crisis to illustrate the consequences of partial integration and member-state-first thinking. In 1999 dozens of top European economists wrote the commission warning that a common monetary policy and single currency could succeed only if the fiscal policies and regulation of financial sectors, too, were harmonized among members adopting the euro. But they were ignored. Member states would share monetary policy but retain full control over their domestic expenditure and revenue, budget deficits and government debt, including tax laws, as we see in Luxembourg.  

Most of the euro’s architects knew this condition was untenable in the long run. But they saw no other way to get to their goal: Europe’s complete political and economic integration. Put to a vote, the volk and most nations would have turned it down. The introduction of a common currency, figured the architects, would automatically propel the euro members toward such unity. Instead they got the euro crisis in 2008, which isn’t over yet. The crisis has put the EU’s nation-first logic on display. When the euro was conceived, it was the wealthier nations such as Germany that refused to make the zone a transfer union, which guaranteed the solvency of fellow states facing financial peril — including loans or transfers of collateral from stable to instable nations. A no-bailout clause was inserted in the treaty at Germany’s behest.

Although it brought the EU to the brink of collapse, the crisis forced the eurozone in the direction of fiscal union. Germany has fought this tooth and nail — at one point even floating the expulsion of Greece — yet finally agreeing, under intense pressure, to fiscal integration through the European semester, the banking union, project bonds and the creation of the European Stability Mechanism.

Still, though, the eurozone is not a full-fledged transfer union and won’t be until member states rethink the EU. The euro crisis is just one example of the member states undermining EU-wide interests. Cases abound of individual states flouting the common good by fighting domestic battles on the EU level. Luxembourg, Austria and the United Kingdom systematically prevent tax regulation and block proposals for an EU-wide financial-transaction tax (which enables Luxembourg to act as a secret tax haven for multinationals). Another example is Poland, which recently prevented the EU from adopting stringent carbon emission reduction goals or binding energy efficiency standards for 2030. And France regularly stops the EU from reforming the common agricultural policy, which constitutes 40 percent of the annual EU budget.

Yet, the source of EU’s dysfunction is not national egocentricity per se but the setup of the union, which allows member states and their body in the EU, the Council of Ministers, to dominate business. The council takes the union’s important decisions, most of which must be unanimous.

Moreover, even the Parliament, the EU’s only directly elected institution, ultimately serves the interests of the national states. In the EU elections, for example, all voters in Spain vote for Spanish candidates on an all-Spanish slate. This means that candidates appeal to domestic voters on domestic issues, not EU-wide issues with the good of all EU citizens in mind.

The 2014 elections was the first time that the member states had to take account of the results of the parliament vote in picking a commission president. Despite this gesture to European democracy, though, only Germans were able to vote for Martin Schultz, who ran as the EU Social Democrats’ front man and for commission president against Juncker. Schultz’s campaign slogan succinctly captures this conundrum: “Only if you vote for Martin Schultz and the SPD [Germany’s Social Democratic Party] can the EU commission president be German.” Ironically, EU democrats such as Schultz had been fighting this sentiment for more than a decade. But appealing to German electorate was the only way for Schultz to win votes where they count — in Germany.

This is the democracy deficit, which has led to plummeting public trust in the EU and low turnout in EU parliamentary elections. This is also one of the reasons for the rise of Euroskeptic parties both on the right and the left. Since there’s no classic opposition among the mainstream parties, the only way for voters to voice their unhappiness with the EU is through the radical Euroskeptic parties.

This is why calls for a European res publica have been growing — from prominent figures such as the French-German Green Party member Daniel Cohn-Bendit, the Austrian writer Robert Menasse, Germany’s President Joachim Gauck and the British scholar Timothy Garton Ash. Overcoming nation-state borders and logic was enshrined in the postwar European treaties and should now, finally, be acted upon before the inherent contradictions in the current structures tear the EU apart.

This means giving up the nation-state as the foremost unit of organization in Europe in favor of a single, transnational European Republic. Participating nations would come together under one fully integrated set of laws and policies, one economy and one government. All Europeans — from Nicosia, Cyprus, to Nuorgam, Finland, to Limerick, Ireland — would enjoy the same social rights. The eurozone could create a parliament with three branches of government. There would be an all-Europe voter list for republicwide elections. Eurobonds would resolve the discrepancies of in the monetary union.

Menasse and the German-French analyst Ulrike Guerot, two of the republic’s foremost supporters, have argued that the final form of this avant garde project would be determined through supranational European democracy. “The economy, the currency and policy are all interlinked, and only a pan-European body politic, legitimized by a supranational democracy, can begin to win back control over the economy,” they said in an essay published by The Social Europe Journal last year.

The idea is less radical than it sounds. It is no news that the classic 20th century nation-state model is long passé. The nation state is poorly fit to address the burning issues of the day — globalization, climate change, migration, terrorism, growing regionalism, trade and others. Besides, member states have already handed over many aspects of their sovereignty to the EU — and benefited from it. A republic is the final leap, the last stage of an integration that has been underway for decades. But it can go no further as it is.

And if the republic delivers, it will become an important counterweight to the far right and left, which are now benefiting from dissatisfaction with “too much” Europe. A common European army, shared diplomatic structures and a single, integrated energy policy would save Europeans billions. Extremists feed on the current, untenable constellation. With the democracy deficit erased, they would have much less grist for their mills. Regions such as Catalonia, Scotland, Transylvania, Istria, Tirol and many others would finally enjoy the kind of autonomy they desire — but cannot get in the nation-state.

It’s also important to distinguish the vision for European Republic from a United States of Europe. The republic would be decentralized with as much decision-making as possible coming not from a central government but from local and regional bodies. Its democracy would come from below and its structures flexible.

“We need a European vision,” says Cohn-Bendit, an EU parliamentarian for 20 years who stepped down this year. “We’re stuck in a fog and are spinning around in circles. If we say, ‘That’s where we want to go,’ then that gives us a direction.”

An EU republic may be the dream of a few idealists at the moment. But then, the EU itself was given life by a few idealists with a dream six decades ago.