Eurotower: the source of the eurozone's economic government
'It isn't just the euro. Europe's democracy itself is at stake,' says Amartya Sen over at the Guardian. To be fair, he's not talking about the euro or the European Union very much; the main focus of his article is on the behaviour of the ratings agencies - which, whether they're right or wrong, can hardly be described as democrat. But, nonetheless, his headline rises an interesting question: is the euro a help or a hindrance to European democracy?
First rule of questions in headlines - the answer is always 'no.' Membership of the euro automatically disqualifies elected national governments from control over important aspects of their national economy, thereby drastically reducing the influence of their electorate over their economic policy. That's not a political point - that's just what happens when a government uses a currency along with sixteen other countries. Its control over it becomes diluted.
Anatole Kaletsky once wrote an article in The Times that says precisely that. He sums up the argument in two simple phrases: 'a country that gives up its currency loses control of its economic destiny' and the euro 'prevents different countries adopting the variety of social and business models that voters demand.' He wrote, back in 2005, that 'a currency is to national economic management what a border is to political sovereignty.' An apt comparison now that borders have been re-established - and political sovereignty reasserted - temporarily and permanently, across what was once was border-free zone where the executive of the European Union, which never faces a popular ballot, set policy.
There's also one other point raised in that article regarding the democratic deficit at the heart of the management of the euro and the eurozone: if elected national politicians in the eurozone do not control the national economy or that of the eurozone as a whole, who does? The answer is the European Central Bank. To paraphrase Wim Duisenberg, first president of the ECB, in light of recent events, 'there is no central bank in the world as dependent on politics as the European Central Bank.'
The bankers may be economists, and it may have a governing council comprisoned of the governors of central banks from eurozone countries, but it is also unelected by the people - as any central bank would be - and is ideologically committed to the European Union as an institution. It is a European Union institution. The chief architect of eurozone economic policy, the ECB cannot afford to be unaccountable, secretive, and partial: but it is all three of those things.
There is a third, and final, aspect of the euro's anti-democratic tendencies: the existence of the post of President of the Eurogroup, currently held by Jean-Claude Juncker. The President himself is not exactly a democrat at heart; he once said that he preferred 'secret, dark debates,' and that 'when the going gets tough, you have to lie.' His job is similar to that of the President of the European Council, Herman van Rompuy; he is the chairman of meetings of elected heads of state.
Although he - and the two other unelected EU officials at meetings, the Economic and Monetary Affairs Commissioner, Olli Rehn, and the President of the European Central Bank, Jean-Claude Trichet - do not vote, they wield great influence over the affairs of the elected finance ministers who participate. He has also adopted co-ordination measures that have taken more of the power over national economies from elected national governments.
Dominique Strauss-Kahn, former French Finance Minister and President of the International Monetary Fund, who played a key role in the early bailouts and overseeing the world economy during the recession, did once say that the euro 'was a conquest of sovereignty.' It seems he was right.