Europe’s Magna Carta?

The draft constitutional treaty adopted by the Convention’s is not a quantum leap in integration, but it bolsters leadership structures, divides competences more clearly and improves decision-making procedures.

The European Convention has presented the final draft of a treaty establishing a constitution for Europe thus concluding sixteen months of work. The draft consolidates and supplements the existing treaties. An intergovernmental conference must now decide on the final text of the treaty. The conference will be launched on October 4 under the Italian EU presidency. By then, Sweden will have voted on the adoption of the euro. The last referendum on EU entry to be held in one of the accession countries will also have taken place (Latvia on September 20), so there will be no further obstacles to enlargement from this side either. The accession countries will be represented at the intergovernmental conference, just as they have already taken part in the European Convention. The treaty is to be signed in May 2004, after the new members have acceded and before the elections to the European Parliament will take place in June.

This timing, however, presupposes that the national governments reach agreement on the final wording of the treaty relatively quickly at the intergovernmental conference and do not attempt to alter or renegotiate individual elements. The European Council has described the draft constitution as a “good basis for starting in the Intergovernmental Conference”. But the remaining dissent on aspects of the institutional sections of the draft constitution is very obvious. Some member states have already expressed reservations about fully subscribing to the Convention’s final draft. Thus, there is still the danger of another unproductive intergovernmental conference as seen in the past.

Since the new treaty establishing a constitution for Europe, which runs to some 338 articles, has to be ratified by the parliaments of 25 member states, it will probably not enter into force until 2006 at the earliest. Besides, the experience with the ratification process for the treaties of Maastricht and Nice has to be remembered: the fate of these treaty reforms was totally up in the air for a while owing to the negative outcome of referenda in Denmark and Ireland. Some member states have announced their intention to hold again a referendum on the constitution. Since the new treaty can presumably, like its predecessors, only enter into force after it has been ratified by all member states, delays cannot be ruled out.

The convention – a successful reform approach?

The decision to call a European convention was taken after the long and dissatisfactory negotiations at the summit of the European heads of state and government in Nice (December 2000). The outcome of the summit – although in force as the Treaty of Nice since last February – did not prepare the Union for the inclusion of another ten or more member states. This prompted heavy criticism of the role of the European Council and its inability to reform the treaties for the future. In economic terms, the last three intergovernmental conferences – Maastricht, Amsterdam, Nice – are an example of the law of declining marginal returns.

In response, the European Council at its meeting in Laeken in December 2001 combined a blunt report on the deficits and problems dogging the EU with a visionary mandate: acting along the lines of the procedure which had led to the successful compilation of the European Charter of Fundamental Rights under the chairmanship of Germany’s former president Roman Herzog, a convention was to look into the pressing issues relating to the EU “as broadly and openly as possible” and to draw up proposals for a far-reaching reform of an enlarged Union. Has the Convention with its 105 members fulfilled this mandate?

Expectations that the Convention would bring another quantum leap in integration – like those achieved by the Single European Act or the Maastricht Treaty – have admittedly not been met. But the present draft definitely goes way beyond cosmetic corrections to the existing treaties. The advances include:

• The consolidation of the existing treaties and the endowment of the Union with legal personality.
• A clearer distinction between the competences of the Union and those of the member states, and a more transparent legislative procedure.
• The inclusion of the Charter of Fundamental Rights.
• Improvements in the individual EU institutions’ decision-making procedures and ability to act.

Despite all the proposed changes, the draft constitution keeps to the familiar, but only moderately effective, institutional structure. The attempt to reconcile fundamentally different views of the political finality of the Union did not succeed. The Convention was caught in a dilemma right from the start: it was expected to produce ambitious results, yet the results could not be too bold since the governments of the member states have the final say on the constitutional treaty. And towards the end of the Convention the government representatives exerted pressure in favour of national interests – often at the expense of the community. Once again, many of the compromises were dictated by nation-state or small-state thinking, with the result that shortcomings in the functionality of the Union’s institutions have been retained. In addition, many of the treaty provisions are not to take effect until after the European Parliament (EP) elections in 2009, which means that the enlarged Union will have to live with the present structures for another five years.

New institutional balance within old mould

One of the key points of the treaty reform – and also one of the trickiest – was the revision of the institutional architecture. The most pressing area was the Council of Ministers.

According to the draft, the EU will in future have a dual leadership: the president of the European Commission – proposed by the European Council and elected by the European Parliament – who is to be joined by a president of the European Council. The discontinuation of the sixmonth, rotating presidency of the European Council will enhance the continuity, coherence and visibility of the Union, especially in its external image. It may also enable the European Council to reach consensus more easily, and help to maintain political momentum towards the Union’s strategic goals. The powers of this full-time Council president will be much fewer than originally proposed, but the presidency will still be able to meet the stated requirements.

Time alone will tell whether the institutional balance within the Union can be maintained with this compromise. Disputes over competences within the triumvirate – president of the European Council, president of the Commission, Union minister for foreign affairs – cannot be ruled out. In such cases the Commission would presumably be in the weakest position. This is one of the reasons why it would have been better to have the Commission president elected directly by the EP (instead of on the proposal of the heads of government) and confirmed in office by the heads of state and government: this would have strengthened the legitimacy of the Commission. In this area, though, the draft treaty can be seen to incorporate a certain vision. It leaves room for the president of the European Council also to be a member of another European institution, i.e. the president of the European Commission could at the same time chair the European Council. This means that in the course of time the EU could be represented by just one president.

The European Commission might in future be better run owing to the upgraded authority of its president. The president has stronger powers to lay down guidelines and can also define the different portfolios, i.e. give work considerations precedence over national proportionality. From 2009 the numbe r of “European commissioners” (i.e. those with their own portfolio and with voting rights) will be limited to 15, including the president and vice-president. Additional “commissioners” (without portfolio or voting rights) can also be appointed. A system of rotation is to ensure all member states are treated equally, by reflecting the demographic and geographical range of all the states. Exactly how this would work has not yet been clarified. But it certainly ought not to be modelled on the complicated rotation system of the ECB. The compromise meets the demand of the smaller member states that each country should have its “own” commissioner, while the limited number of European commissioners (those entitled to vote), should ensure that the Commission can work efficiently even after the eastward enlargement. One might have asked, however, why in this body, designed to represent the genuine European interest, nationality should play a role at all. In accordance with this arrangement, the next Commission, which will commence work at the end of 2004, will serve its full term with a college of 25 commissioners all entitled to vote. Unlike the time delay in the case of the reweighting of votes in the Council, the postponement here makes sense as a change of system when the new treaty takes effect in 2006/2007, i.e. part way through the term, would only hamper the work of the Commission.

Decision-making procedure reformed

More important than the external image of the institutions is their ability to function internally. This depends especially on the way in which decisions are reached in the Council of Ministers. In times of rapidly changing global circumstances, firms (and consumers) need swift, prompt decisions. This has proved to be particularly difficult in areas where decisions have to be unanimous. There have been some more examples recently, ranging from the extortionate pressuring by Italy over the directive on the taxation of income from savings in the EU, to the watering-down of the takeover directive, and the unsatisfying agreement on a community patent. The negotiations on all three issues have been dragging on for decades. For the affected sectors of the economy – and for Europe as a whole – the costs of the national veto are considerable. It is therefore particularly encouraging to note that, in the ordinary legislative procedure, decisions in the Council of Ministers will in future generally be taken on the basis of a qualified majority. The national veto is to be abolished for a total of 35 areas. In principle, it is to be retained with regard to the common foreign and security policy, aspects of asylum and immigration, taxation and social policy. However, for some of those areas the draft offers member states the option (“passerelle”) to decide unanimously to take a decision by majority voting. This is explicitly the case for corporate income tax. However, a consistent abolition of the national veto would have been preferable. The prospect of a majority decision helps greatly to concentrate the minds of the member states on seeking a compromise.

The most difficult hurdle in the formulation of the draft constitution, and one of the main reasons for the delays, was – not surprisingly – the weighting of votes in the Council of Ministers (in decisions on the basis of a qualified majority). Complex and non-transparent rules on decision-making are one of the burdens created by the Nice intergovernmental conference. The Convention has now proposed a clear and simple system that can also be readily understood by Europe’s citizens. In the ordinary legislative procedure a proposal can be adopted on the basis of a “double majority”, consisting of the majority of member states, representing at least 60% of the population of the Union. This proposal dispels the concern of the large member states that in a Union with 25 members they might be repeatedly outvoted b y the smaller partners, who would be in the majority. The smaller countries, though, are sceptical about the change as the present system works in their favour (owing to the relation between voting rights and population). Spain and Poland in particular reject these changes as they fear a considerable loss of influence. Sensible Council voting rules are, however, essential if the Union is to be able to act fast and efficiently and is to find the necessary acceptance among the citizens.

Economic-policy framework

At first glance, the draft constitution brings little that is new for economic and fiscal policy. Two aspects are examined more closely here: the upgrading of the Eurogroup, and concern about further centralisation of economic-policy activities.

After enlargement, the countries which are members of the European Economic and Monetary Union (EMU) will, for the present, be slightly in the minority in the Economic and Financial Affairs Council (ECOFIN). The Eurogroup is therefore obtaining greater independence vis-à-vis ECOFIN in economic-policy issues. It is, for example, to be able to adopt further-reaching measures on the coordination of the members’ economic policies, on budget discipline, and on budgetary issues. In such cases, members of the European Union that are not in EMU are not entitled to vote in ECOFIN decisions. Also, the finance ministers of the (currently) twelve EMU member states can in future elect one of themselves as Eurogroup president for two years. That will give the group greater continuity in its leadership and improved external presence. The draft does not, however, specify the competences of “Mr. Euro”. This means that the question of the external representation of the monetary union is also unanswered.  

The new arrangements may help EMU to function better and improve its internal cohesion. But what are the additional competences or decision-making scope to be used for? The budgetary rules established jointly by the EU members in the stability and growth pact are already being worryingly ignored by the EMU members. This fuels doubts whether the member states are in fact willing to press ahead with the consolidation of their budgets over the medium term by cutting spending and by tackling urgently needed structural reforms. It is not clear how voluntary coordination can correct such wrong policy decisions.

Finally, modified formulations regarding the EU-wide coordination of economic policies have led to renewed concern as to whether the allocation of tasks is economically efficient and whether the principle of subsidiarity is adequately observed. For example, social policy is listed as one of the areas for which competence is to be shared by the EU institutions and the member states. This gives the impression that the European Commission can, and will, get more involved in social legislation. Certainly, reforms to put the financing of the national social systems on a sustainable basis are urgently needed throughout the EU. But the home-made problems of the individual states cannot be solved by uniform European regulations, never mind by coordination. The systems can only be adapted or changed in the member states themselves.

In addition, the Union – and not the member states together, as at present – is in future to coordinate not only the national economic policies, but also the employment policies. Since the member states currently still have sole responsibility for labour market policy, there is a danger that this will undermine the allocation of competences foreseen in the draft constitution. And it is not clear what positive effects are supposed to be achieved through greater coordination by the Union. The open method of coordination that was introduced with high expectations as part of the Lisbon strategy has not proved particularly successful. Recognised management practices – best practice comparisons and benchmark ing – turn out to be not very effective in the world of politics. Countries show little willingness to take measures that have been successful in other member states and adapt them to their own circumstances. Instead of widening the Union’s powers of coordination, it would have been better to consider systematically reducing its competences. The Laeken Declaration had included this aspect in the brief for the Convention. In the enlarged, increasingly heterogeneous Union, with still limited financial and personnel resources, it would be particularly desirable to have the Union concentrate on its core competences. In this respect, the Convention passed up the chance.

Read more analysis on the

Deutsche Bank Research website.