From a Debt Crisis toa Crisis of Identity

Two Narratives
The Crisis

It's a debtor's problem• Some States lack of fiscal
discipline and economic
competitiveness generated
unsustainable public debt
with negative consequences
for other states.

It's a creditor's problem• Unfettered capital flows have,first, created a credit bubble insome states and, then, byfleeing from those states, a runon their debt

Two Problems: Two
Democratic Malfunctions• Inter-state democratic externalities• Transnational evasion from national
democracies

Europe's answerMaking Sense of EU (In)action Europe's True Democratic Deficit

EU policies depend on nationalpolitics

Diffuse political authority

A EU or State Crisis?
National democracies are not enough to guarantee self-government
anymoreEurope can help reinstate democracy but can as well reinforce thechalenges to it
Europe in search of an answer

A roadmap for exiting the crisis?

Where do we want togo?
• EU must provide a renewed justification for its
existence: its democratic and justice addedvalue.

What do we need on
the way there?
• We need to render the benefits and democratic consequences ofinterdependence visible to the citizens• We need political authority and accountability• We need to reestablish mutual trust• We need solidarity that is linked to the wealth generated by Europeanintegration• We need European politics and workable interfaces between
European and national politics

To sum up: we need European integration to be embedded in a broader
theory of democracy and justice in Europe (EU and States)Is the Solution a Fiscal Union?
What does it mean?
• Control and Supervision of National
Budgetary and Fiscal Policies• Financial Solidarity• Democratic Legitimacy

A Union of Rules?
• Stricter rules, stronger enforcement and more
centralised budgetary and fiscal powers• Not enough: it will never be (or perceived as)
sufficiently effective for the markets and it would
create an unbearable tension with national
democracy (either it will not be effective or thediscipline it will impose will collide with national
democracy: transfer of fiscal powers must be
associated to transfer of fiscal solidarity and stronger
democratic legitimation)

A Union of National
Democracies• Fiscal Discipline but with conditional debtmutualisation (in the form of ESM loans, ECBintervention after political agreements,Eurobonds)• Democratic legitimacy through nationalpolitics: stronger inter-governmental role andparticipation of national parliaments

It wil not work:• Economically: it will not provide the certainty andpolitical authority needed to reassure and control
the markets. It depends on constant national
negotiations and will be subject to permanentveto (including by national parliaments or courts)• Politically and democratically: those lending will
resist insuring debt of states whose policies they
will never fully control; those subject to discipline
and austerity will feel governed by other states

EU Semi-federalism: a genuine
fiscal and political Union• Financial solidarity must be linked to the wealth generated
by the process of European integration and not totransfers between states. It must also be oriented by thecorrection of distributional problems generated by theinternal market or(and) that States can no longer address.
• We need European politics and political authority tosupport European powers and policies. European
democracy requires European politics.
• We need to work on the interfaces between European andnational political spaces.

The Fiscal Union• A New EU budget (3% GDP) for fiscal stability
and new policies.
• Link between the budget and resources
resulting from economic activities promoted or
benefited by the internal market and state
activities with externalities on other states.
• A budget reinstating social justice in Europe.

Advantages:• No guarantees of other states debt (solidarity will belimited to citizens contribution to EU budget).
• Stronger certainty for the markets.
• A legitimacy enhancing budget (link between EU financial
solidarity and EU - not States - wealth; and resources
capable of reinstating distributive justice that has been
lost at state level).
• Link between financial solidarity and democracy: notaxation without representation but also no representation
without taxation

The Political Union

Policies and Politics

Policies• Correcting the Policy Gap
Asymmetry between policy impact and policy tools• Correcting the Communication Gap
Inter-governmental policies and constitutional discourse• Correcting the Impact Gap
Stick and carrots. Systemic impact.

Politics: A European
Political Space• European politics to support a EuropeandemocracyHow?

From here:To here:What's the difference?
• Cross-border politics• European elections about Europe• A more ideologically coherent Commission(with risks too)
• Stronger political capital and political authority

EU semi-federalism• Two different sources of democratic legitimacy as withsemi-presidencialism• Commission and Parliament with Council as veto player• A better interplay between European politics andnational politics:
Ex: The state of the State in Europe

One Europe, No Europe, or ManyEuropes?
A choice not a logic necessity
Europe must offer different ideas of Europe and not
only the possibility to be for or against Europe