Ever closer union

“Dan Drezner”:http://www.danieldrezner.com/archives/000662.html points to this developing “story”:http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1059479073692&p=1012571727102 in the FT as an important test case for the EU. Under the “Growth and Stability Pact,” which lays down the rules for Economic and Monetary Union (EMU), all participating EU member states have to fulfil certain criteria in their national macroeconomic policies. Among other things, they’re not supposed to run a budget deficit over 3% of GDP, except in situations of dire emergency. It now appears that Germany is going to exceed this limit for the third year in a row. Ironically, it was Germany that pushed for tough rules on budget deficits in the first place – the German central bank was terrified that Italy and other ‘less responsible’ member states would go on spending sprees after they joined the EMU club.

The European Commission is making noises about keelhauling the Germans for their bad behavior, which Dan sees as a key test case for EU integration theory. International relations scholars who study the EU have traditionally been divided into two camps – those who believe that the EU is a standard international organization, with no independent power to do anything that its more powerful member states don’t want it to do, and ‘supranationalists’ who believe that it’s something more than the sum of its members. Dan is sympathetic to the former point of view; I tend to adhere to the latter. Dan thinks that the Commission is likely to back down on its threats, so that Germany, which is the most powerful member state, prevails – he believes that this will provide powerful evidence that the supranationalists are dead wrong. I think Dan’s prediction as to the likely empirical outcome is right – but I don’t think that this tells us very much about the bigger theoretical questions that Dan (and I) are interested in.

Why not? Simply, put, the Growth and Stability Pact is a botch. The Commission has been muttering for years that it has been put in an impossible position – under the Growth and Stability Pact, it acts as whistleblower when EMU participants behave badly, but doesn’t have much real power to sanction them (the final decisions on punishments rest with the member states themselves). Furthermore, the standards that the Commission is supposed to enforce make no sense at all in economic terms, and indeed are likely to have perverse, and sometimes quite nasty, economic consequences. And the Commission itself has argued this: Romano Prodi, the Commission’s President gave an “interview”:http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2002/10/18/cneuro18.xml last year in which he baldly said that the Growth and Stability Pact was ‘stupid.’ He was promptly howled down by various member state governments, all of whom tacitly agreed with his argument, but didn’t want it bruited around too much in public. Thus, what we’re seeing at the moment is less an effort by the Commission to bring Germany to heel, than a ritualistic exercise in face-saving. The Commission is embarrassing Germany a little, but knows quite well that there isn’t the scintilla of a possibility that Germany is going to be punished by the other member states. However, it still feels that it has to go through the motions of reproving Germany, in order to maintain some minimal level of credibility.

There is a lot of interesting stuff happening around EMU – but it’s not the kind of development that gets newspaper headlines. EMU participants are increasingly coordinating their economic policy with each other through various informal processes. Over time, this might lead to the kind of deep integration that would convince realist skeptics of the EU – but it’s not happening yet. Where there is strong evidence that the EU is more than the simple sum of its member states is in another area of the European integration process – legal integration. Andy Moravcsik, whom Dan rightly cites as a strong proponent of the EU-as-international-organization theory, admits that his theory doesn’t account for the actions of the European Court of Justice, which has been extraordinarily effective in independently creating a body of law and precedent to which member states are subject. European Union law has direct effect in member states, so that EU law overrules domestic law, even in cases where a member state legislature hasn’t actually passed a particular piece of EU law as domestic legislation. The EU is far from being a super-state in the making, but nor is it simply a membership organization like NATO or even the WTO. It’s likely to go on perplexing international relations theorists for a good while yet.