Introduction
The Economic and Monetary Union (EMU) created in 1992 with the Treaty of Maastricht was (in)famously asymmetric.Footnote 1 Monetary union became fully supranational by creating an independent European Central Bank (ECB), while economic union remained predominantly intergovernmental and much less developed, with, among others, no significant fiscal capacity and controversial economic policy coordination rules. But asymmetry also concerned the relationship between ‘the economic/monetary’ and ‘the political’, or, in other words, the absence of a fully-fledged democratic accountability framework that would flank EMU.Footnote 2 The Treaty of Maastricht was supposed to provide such a framework under the vague umbrella term of ‘political union’. Understood in this article as a shorthand for a broader democratic accountability framework not limited to elections,Footnote 3 the term political union was, however, quite vague. Over the years, it came to mean very different things, including the European Economic Community’s (EEC) foreign policy cooperation. Whatever its meaning over time, the result was that the Treaty of Maastricht did not set up the European Union’s (EU) EMU within a consistent democratic accountability framework. Instead, the Treaty of Maastricht provided a fully independent monetary policy, surveillance of national economic policies under a complex balance between the EEC Commission and the member states and a European Parliament weakly involved in these processes.Footnote 4
This double asymmetry of EMU – economic/monetary and economic/political – is essential in the perspective of the vivid debate about the alleged neoliberal nature of European integration in general and EMU in particular.Footnote 5 There is no space here to recount the long, rich and complex literature on neoliberalism. Problems of definition have often been raised and these are compounded by the variety of meanings of the term across both sides of the Atlantic, as well as the dynamic nature of the neoliberal movement itself.Footnote 6 Some authors choose on purpose to use broad definitions, encompassing neoclassical economics, monetarism, deregulation and free market.Footnote 7 The large literature focusing on neoliberalism, however, approaches European integration specifically from the perspective of ordoliberalism. Also called the Freiburg School of neoliberal thought, ordoliberalism developed in Germany in the inter-war period and originally centred on the figures of economist Walter Eucken and jurists Franz Böhm and Hans Grossmann-Doerth as well as later the journal Ordo.Footnote 8 Several notions form its core, including the rule of law, competition and monetary stability. Much of the historiography of European cooperation and integration focused on competition policy, since it was both so central to ordoliberal thought and one of the earliest policies developed by the EEC.Footnote 9 The question of economic programming at the Community level came next, as it displayed diverging national economic philosophies, in particular between French-inspired dirigisme and German-inspired ordoliberalism.Footnote 10 Another site of reflection of these different economic philosophies was EMU. In addition to issues related to the role of fiscal policy and fiscal governance, the question of the independence of the ECB attracts much attention as central bank independence is often described as one of the central tenets of ordoliberalism.Footnote 11
The crisis of the euro area in the 2010s reignited the debate about the ordoliberal nature of the EMU construct and its reform. While the debate of the 2010s did not address the origins of EMU but instead its evolution, it allowed the vividness of the debate to be highlighted again along with the difficulty of agreeing on the ordoliberal nature of EMU/the EU. A common reaction in the early days of the euro crisis was to describe the German government’s policies as being guided by ordoliberalism.Footnote 12 Several scholars countered this view. For instance, Brigitte Young argued that ‘neither the distinct set-up of EMU, nor the logic of the monetary union, are the outcome of specifically ordoliberal principles’.Footnote 13 Werner Bonefeld also rejected the view that ordoliberalism was ‘the operative theory of (key) German policymakers at key points in the institutional design of the European monetary union and in the policy response to the Euro crisis’.Footnote 14 Cardwell and Snaith argued for a more moderate position but looked at the EU as a whole, not just EMU, and found ordoliberalism as ‘at the very least one way of understanding the EU’.Footnote 15
EMU’s asymmetry between the political and the economic/monetary may, however, be better thought of with reference to neoliberalism rather than to the German strain of neoliberal thought alone. As Thomas Biebricher notes, ‘ordoliberals had no firsthand experience of EMU’, and while they did have views on monetary orders (especially the gold standard), they did not discuss ‘the possibility of a transnational monetary union’ such as the one created at Maastricht.Footnote 16 Further, Philip Mirowski argues that ordoliberalism became progressively sidelined from the 1980s within the neoliberal ‘thought collective’, just as the debate on EMU intensified.Footnote 17 One aspect that the literature on neoliberalism singled out in recent years specifically relates to the question of democratic accountability.Footnote 18 One of the definitions that has emerged in the past ten years focuses on an interpretation of neoliberalism as an attempt to shield capitalism from democratic accountability. Quinn Slobodian highlighted how neoliberals aimed at what he called the ‘encasement’ of capitalist developments at different scales globally, making sure that they can be freed from the risk that democratically elected governments’ debates would interfere in the operation of what is perceived as the free forces of the market. This idea was also explored in J. Magnus Ryner’s analysis of the origins of the European monetary system (EMS).Footnote 19 This strand of neoliberalism could, however, be considered to express some form of ‘market radicalism’. Kevin Vallier for instance argues that ‘neoliberals are broadly democratic’ and highlights both the strengths and limits of democracy.Footnote 20 Whether ‘market radicalism’ or simply ‘neoliberalism’, this specific aspect of this current of thought is particularly relevant in a discussion on the Treaty of Maastricht as it matches quite closely the asymmetry described in the opening paragraph: a well-developed European monetary union functioning in full independence and beyond the reach of democratic deliberations.
Observing the correlation between the Maastricht construct and this definition of neoliberalism, however, leaves open one question: was this outcome intended? Did European policymakers – understood here as the non-homogeneous group of civil servants from national governments or EEC institutions involved in the negotiations leading to EMU, regardless of whether they would label themselves neoliberals or not – consciously seek a result that would fit neoliberal aspirations about the distribution of the EU’s economic, financial and political powers? This article argues that while Europe’s EMU can be described as neoliberal in that it shielded economic and financial power from a democratically accountable framework, this outcome was nevertheless accidental. The asymmetric construction of EMU, whether economic/monetary or political, was undoubtedly intentional because the European policymakers in charge of the negotiations were largely conscious of the imperfections of the setup being developed. However, such imperfections were not intended to match a specific neoliberal ideology. Instead, these imperfections resulted from another set of concerns, chief of which was the reluctance to centralise decision-making power at the EEC level – especially, but not only, through a reinforcement of the powers of the European Parliament – out of a fear of losing parts of the nation-state’s sovereignty. Bold proposals put forward since 1957 failed against the need to surrender sovereignty to any new EEC supranational institution or substantially reinforce its powers. Rather than neoliberalism in disguise, the EMU setup agreed at Maastricht reflected the basic reluctance of EEC member states to abandon sovereignty. Some policymakers, in particular from the French government, argued that keeping executive decision-making at the national level and privileging EU intergovernmental arrangements was more democratic rather than less so, as it was considered to allow an effective counterbalancing of the power of an independent ECB. This article will illustrate different visions and changing conceptions of what democratic accountability could consist of, including an increased role of heads of government in EEC deliberations, a greater scrutiny of EEC decisions and a more important role by the European Parliament.Footnote 21 What can retrospectively be portrayed as an asymmetry between political union and EMU was, therefore, intentional, but the coincidence between this outcome and what some neoliberals could have hoped for was unintended.Footnote 22
In showing how European policymakers created an EMU that could match a neoliberal description while doing so unintentionally, this paper contributes to the literature discussing the EU’s neoliberal nature by focusing specifically on the case of EMU.Footnote 23 An important line of argument, led in particular by Wolfgang Streeck, presents the EU as a neoliberal project from the beginning that has only known full maturation with the advent of EMU in 1992 with the Treaty of Maastricht.Footnote 24 Countering this argument, this article instead highlights historical contingency for the success of neoliberal ideas. It goes in the direction of Stedman Jones’ insistence on ‘luck, opportunism and a set of contingent circumstances play[ing] the most crucial roles’ in the rise of neoliberal politics as well as more recently Julian Germann’s argument about Germany’s unwitting contribution to the construction of post-war neoliberal organisations.Footnote 25 In the same vein, specifically looking at interpretations of EMU reform, Federico Bruno identified a strand of analysis that he called ‘“ordoliberalisation-by-accident”: no actor deliberately pursued an ordoliberal agenda, but the dynamics of globalisation and of policy-making in the European Union caused the reforms to reflect an ordoliberal rationality’.Footnote 26 Explaining the origins of central bank independence in Germany, Jörg Bibow insisted, too, on the ‘historical accidents and the peculiar personalities involved’.Footnote 27 This article argues along these lines, analysing the case of discussions and negotiations about the setting up of an EMU in the EEC and finding that the governance option most actively promoted by the French government and endorsed by the other eleven EEC member states at Maastricht resulted in what could be described as a neoliberal setup arising from non-neoliberal intentions.
Realising that this setup was accidental rather than a deliberate policy choice matters because mistaking one for the other creates a misunderstanding on the motivations of EMU. A widespread belief that a deliberate move towards neoliberalism was historically driving the EMU process confuses neoliberalism with an opposition to the surrender of sovereignty. What was missing, and is still missing, was the politicisation of the EMU project that could have been facilitated by the development of a full-fledged democratic institutional framework. While the outcome is the same – shielding capitalism from democratic accountability – its roots differ. In misunderstanding the true origins of this outcome lies an explanation of the inability to adequately address an issue whose origins were accidental rather than preordained.
Why and how, then, did this accidental neoliberal outcome come about? To answer this question, this paper first examines how, since 1957, the main views about the EMU–political union connection tolerated the asymmetry between the two as a temporary situation. The imbalance between the economic and the political was not the desired result: it was a momentary step toward a balanced outcome, possibly federal over time. Then it analyses the view according to which the balance reached at Maastricht was believed to be a genuine ‘encasement’ of monetary union in a democratic framework. Finally, it analyses the reasons – well outside neoliberal considerations – that contribute to explaining the failure of the materialisation of efforts to develop a political union concomitantly with EMU, including the weakness of the proponents, the vagueness of the objective and the opposition of member states.
Tolerating a Temporary Asymmetry
Just as the negotiations of the Maastricht Treaty were divided into two Intergovernmental Conferences (IGCs), one on political union, another on EMU, discussions between political union and EMU have often been siloed since 1957.Footnote 28 Distinction between the two was mostly implicit until EEC heads of state and government identified EMU as an official EEC goal on the occasion of a summit in The Hague in December 1969.Footnote 29 The Hague summit gave birth to twin initiatives that reflect well the confusion around the themes of this article: on the one hand, the summit declared EMU an official goal of European integration, and on the other hand, it called for greater political unification.Footnote 30 But by political unification, European policymakers essentially meant foreign policy coordination, for which Belgian diplomat Etienne Davignon was tasked to chair an expert committee that would formulate proposals on the subject.Footnote 31
Should this distinction be taken to mean that in 1969, the plan to separate EMU from its political implications was already in preparation? Not really, as the distinction was primarily functional, in that the two areas of cooperation involved very different policymaking communities, with, to simplify, economics and/or finance ministers and central bankers on the one side and foreign ministries (whether working on actual foreign affairs cooperation or on democratic foundations of European integration) on the other. In their discussions on EMU, this did not prevent European policymakers, in particular in the economic and financial realm, from evoking the connection between economic integration and political integration. However, this separation of topics was not considered to be ideal. Less than two years after The Hague, in February 1971, President of the Commission Franco Malfatti thus complained about this siloed reflection of economic integration and political integration.Footnote 32
In these discussions, European policymakers regularly referred to the connection between EMU and political union but did not theorise it. Finding a solution to urgent economic and monetary challenges was the short-term goal, and fixing these challenges with, say, a monetary facility or a new exchange rate system did not necessarily imply raising big questions such as what the appropriate democratic framework of a full-fledged monetary union would look like. Such a monetary union was not yet in sight, and political union could be dealt with along the way. This thinking held for implicit rather than explicit the experience inherited from federal states, and for instance from the chartalist school of money.Footnote 33 From a theoretical point of view, currencies are closely associated with state capacity. A currency is a foundation for a common identity; and a currency works with the backing of a state.Footnote 34 Moving the reflection further, this leads to a consideration that if a monetary union was developed in the EEC/EU, then a series of other ‘unions’ – economic, banking, fiscal, social…– would need to be developed concomitantly, and ultimately, a political union as well.Footnote 35 Otherwise the development of the other economic-related ‘unions’ would be done at the expense of a democratically legitimate framework that would exist in a state that issues its own currency. This reasoning had far-reaching implications on the state of European integration, and European policymakers did not always spell it out in full. This was not only because the Treaty of Rome did not imply such a political union from the start but also because the Treaty of Rome itself had been devised against the background of the failures to build such a political union in the 1950s, and European policymakers were not willing to repeat these mistakes, as I will come back to below.
Political Union as Consubstantial to EMU
When discussion about the link between EMU and political union was explicit, then both were considered consubstantial. The reasoning was that the more the EEC becomes economically integrated, the more it centralises power and decision-making. The introduction of a single currency, the argument went, called for the creation of centralised economic decision-making, a more significant centralised budget and so on. The creation of centralised institutions would lead step by step to a political union. In November 1960, Commissioner for Economic and Financial Affairs Robert Marjolin, in the European Parliament’s commission on economic affairs, raised the issue of political integration as a side consequence of monetary integration. After having dealt at length with how to develop the latter, Marjolin added: ‘All this [common currency, European federal reserve system, harmonisation of EEC member states’ financial and budgetary policies] will hardly be possible without a more accentuated form of political integration, which is an essential condition for the full realisation of the objectives of the common market.’Footnote 36 Talking again at the EP economic commission in 1963 about European monetary integration, Marjolin explained: ‘the single currency solution implies a much more advanced degree of political unification than is likely to be achieved in the near future within the EEC’.Footnote 37 The European Parliament itself, quite logically, expected an increased monetary integration to be matched by transfers of competences to the European Parliament as well as direct elections.Footnote 38
One specific issue where the democratic accountability framework came out in the open, particularly in the 1960s, was in the discussions about planning (also called programming). The European Commission’s Action Programme of October 1962, of which Marjolin wrote the relevant parts, was adamant about the inclusion of the planning effort in a wider democratic framework, including the social partners, through the European Economic and Social Committee (EESC) and the European Parliament, but not only these:
At some stage in the drafting process, the major economic forces in the Community – industrialists, workers and employees, farmers, independent producers in other sectors, etc. – will have to be consulted, either within the framework of the Economic and Social Committee or through other procedures.
One of the main advantages to be gained from such an undertaking would be a greater understanding by each of the major social groups of the motives of the others and of the public authorities, and a convergence of efforts towards the optimum result for the Community. The European Parliament should be consulted at a very early stage on the principle and modalities of ‘programming’.Footnote 39
Further developing his thoughts, Marjolin explicitly articulated the connection between planning and democratic accountability in the economic sphere in 1963:
This action will have to be undertaken with the support of all the major political and economic forces of the Community, in particular through in-depth discussions within the European Parliament, the Economic and Social Committee and any other forum which may appear appropriate. Programming, by involving all citizens through their representatives in the definition and monitoring of Community policy, should help to strengthen democracy in the economic field. As a means of information, but also as a means of participation in the construction of Europe for the citizens of our countries, it can be a school of civic-mindedness on the European level, the recognition by each of the interests of the other.Footnote 40
Marjolin’s successor, Raymond Barre, was no less convinced about the importance of the European Parliament in the process. In February 1972, Barre said to the European Parliament:
I have no experience of the European Parliament before 1967, but I can say that since 1968 and especially 1969 there has been no major development in the Community in the economic and monetary field on which the Parliament has not been consulted, has not formulated its opinion and has not exercised an influence. That is quite a progress. That is how we will move forward.Footnote 41
This connection was reiterated in the late 1970s. In one of the last calls in the EEC for planning in an EMU framework, the so-called Gruson Report of 1978 read:
Here we want simply to point out that planning with purely technical goals (the only kind examined here) requires a political organisation to negotiate compromises or to find a middle way between antagonistic positions, whenever the planning procedure itself reveals such conflicts. If indicative planning is to intervene, there needs to exist democratic procedures by which compromises can be negotiated when significant conflicts of interest appear.Footnote 42
These calls in the 1960s for a fully democratic framework of development for EEC programming were not just words in the air. Throughout the period, the European Commissioners in charge of economic and finance regularly attended the European Parliament’s commission on economic affairs meetings. Marjolin attended most meetings and often went to the EESC; Barre did the same after him.Footnote 43
Leaving the question of European planning aside, the first major report in EMU discussions, the 1970 Werner Report, did tackle the question of democratic legitimacy. The Werner Report set out very clearly the relationship between the decision-making centres of EMU (both economic and monetary) and the political authority: ‘A deeper study of the institutional problems thus raised is outside the framework of the mission of the Group, which has, however, thought it necessary to raise the essential aspects.’Footnote 44 The Werner Report further stated that: ‘The EMU thus appears as a leaven for the development of political union which in the long run it will be unable to do without.’Footnote 45 However, as with the economic centre for policy decision, the Werner Report did not enter into the concrete institutional challenges such ideas could bring. The authors of the Werner Report argued that it was outside the remit of their Group, but in eschewing the question, the report failed altogether to provide any concrete solution to this key challenge.
A ‘Neoliberal’ Turn?
From this period when EMU and political union were broadly viewed as consubstantial followed, from the mid-1970s, a period when discussions about monetary arrangements seemed to take precedence over political union considerations. The member state–driven cooperation implied by the creation of the EMS in 1979, and the discipline imposed on national governments by financial markets, complements a picture of the rise of a neoliberal view according to which monetary developments would have been shielded from democratic considerations.
Institutional changes in the EEC had prepared the ground for an increasingly state-centred cooperation. The creation of the European Council in 1974 contributed to changing the EEC’s institutional dynamics. Whether in the EEC or in the West with the group of the seven most industrialised countries (G7), the leaders who pushed for the institutionalisation of summit meetings frequently noted that such regular meetings of heads of government meant the reintroduction of elected government leaders in the Western/European economic and financial decision-making processes so far increasingly dominated by unelected experts and ministers.Footnote 46 Heads of government therefore considered summit meetings such as the European Council to be a democratic improvement to the existing institutional setup. This argument would forcefully resurface during the negotiations of the Treaty of Maastricht, as I will explain below.
Other institutional practices changed too. After a period when Commissioners regularly attended the European Parliament’s economic committee meetings, MEPs then started complaining about the rare appearances of Commissioners in their deliberations. In 1975, the European Parliament’s economic affairs committee thus noted: ‘It was felt that the Commissioners were being somewhat lax about their attendance.’Footnote 47 In parallel, faced with an ineffective coordination of member states’ economic policies, several European policymakers put forward proposals to improve this coordination. Such proposals often centred, in the late 1970s and early 1980s, around the idea that a smaller group of senior civil servants should meet up regularly, and outside of classic institutional channels such as the Committee of Permanent Representatives (COREPER), to improve the preparation of Council of Ministers meetings. While this was meant to be more effective in terms of coordination, it also raised the question of the accountability of such institutional developments. Finally, democratic accountability also came up in the discussions about the institutionalisation of the EEC’s borrowing capacity. Created in 1978, the New Community Instrument (NCI) allowed the Commission to borrow on international capital markets to finance projects in the EEC. One important issue of discussion was the supervision of the attribution of the loans.Footnote 48 The European Parliament’s economic affairs committee did not want to see the parliamentary assembly excluded from what it considered part of the EEC’s budgetary process. MEP Erwin Lange, from the German Social Democratic Party (SPD), thus ‘stressed that it was important that Community loans policy should not be left to a body which could not be supervised by Parliament’.Footnote 49 The European Parliament wanted to be able to oversee this spending, while member states were unwilling to grant more powers to it. The European Parliament eventually only obtained the organisation of a regular reporting system from the Commission. From different areas, therefore, the ‘encasement’ of economic and monetary cooperation seemed to be growing.Footnote 50
From 1979, the EMS contributed to aggravating the disconnect between monetary integration and democratic legitimacy at the EEC level, as economic and monetary coordination became ever more member state–driven. No specific new mechanism for political accountability with regard to the EMS was set up. Intergovernmental institutions – including the Council of Ministers of Finance (ECOFIN), the European Council and the relevant committees, the Committee of Governors and the Monetary Committee – increasingly took the lead in the major decisions taken about monetary affairs, without the European Parliament having any substantial counterbalancing power. Such reasoning, imbued with the necessity to find short-term solutions to urgent financial problems, was also present in the reflections of Tommaso Padoa-Schioppa, director of the Commission’s division for economic and monetary affairs, on how to improve the EEC’s economic policy coordination procedures.Footnote 51 In his reflections sent to the Commissioner for economic and financial affairs, François-Xavier Ortoli, in 1981, Padoa-Schioppa reviewed problems and sketched possible solutions. Padoa-Schioppa, however, exclusively focused on how persuasion in economic policy coordination could work, failing to take into account the issue of democratic accountability. Only the policy dimension was taken on board, not the political-democratic one.
Witnessing the slow change from, to simplify, a period when the consubstantiality between EMU and political union was more fully spelled out (1957 to mid-1970s), and a period when reflections on both became increasingly siloed (mid-1970s to Maastricht), it could be inferred that neoliberalism did progressively influence policymakers. The disconnect between the making of EMU and the making of political union was growing. Such a simplification would, however, overlook that not only did calls for the reinforcement of political union in the context of EMU discussions continue but also some European policymakers simply viewed ‘political union’ in the perspective of EMU differently from the classic federalist interpretation that would advocate, among other things, for a greater role for the European Parliament. The next section analyses these two points in turn.
An ‘Economic Government’ to Counterbalance an Independent European Central Bank
Advocacy for connecting political union and EMU among European policymakers continued just as the EMS was being set up. In 1977, when the cabinet of President of the Commission Roy Jenkins started reflecting on a possible relaunch of the EEC’s ambition about monetary integration, Jenkins’ adviser Michael Emerson provided a short brief on EMU to the president of the Commission. Emerson advocated for an initiative in the currency field precisely because he wanted to ‘encase’ EMU in a wider political framework, rather than shield it in an independent and isolated institution. Writing to Jenkins, Emerson did not refer explicitly to democratic accountability but presented the EEC’s complex institutional framework as an advantage for an EMU initiative:
The Community is the only plausible setting in which to go for the large benefits of ambitious economic and monetary integration (or eventually union) because you need the political institutions that can deal simultaneously with all these interrelated questions of trade, financial and economic policy, and arrange tradeoffs between political and economic interests in ways that are impossible between compartmentalised and specialised institutions (such as the GATT, IMF, OECD, UN).Footnote 52
Emerson thus rejected the idea of compartmentalising monetary union outside of other relevant EMU economic and political aspects. One year later, in 1978, the European Commission’s Central Advisory GroupFootnote 53 – a group of advisers Jenkins set up in 1978, and that would later be institutionalised as the Forward Study Unit by Jacques Delors in 1989 – wrote about monetary union that:
It is quite clear, by analogy with the monetary and banking systems operating in any sovereign state, federal or otherwise, that a three-tier system is required to direct and operate monetary union. These tiers are:
– a Community policy-making authority, under democratic control
– a Community central reserve system
– national central banks.Footnote 54
Having chaired a group that reflected on the public finance implications of monetary union and drafted the so-called MacDougall Report in 1977, Scottish economist Donald MacDougall drew similar conclusions. In 1979, MacDougall said to the European Parliament that the bold proposals of his group regarding the EEC budget in a monetary union were ‘a way of getting political union’.Footnote 55 Many other initiatives in the 1980s included a well-thought connection between EMU and political union, including in particular the 1984 European Parliament Draft Treaty establishing the European Union.Footnote 56 Towards the end of the decade, when EMU discussions entered a new stage with the creation of the Delors Committee tasked with the drafting of a new blueprint for EMU, President of the Bundesbank Karl-Otto Pöhl was on the same line. Pöhl wrote in his paper outlining ‘problems connected with European economic union’ submitted to the Delors Committee that:
Parallel to the surrenders of sovereignty by the member states in both general and specific economic policy issues, the legislature would have to be strengthened at the Community level in order to ensure that shifts of responsibility in favour of the supranational level do not result in a loss of democratic authority in the Community. In the final analysis, this might mean that the progressive implementation of a ‘hard’ economic union leads more or less inevitably to a development towards political union.Footnote 57
Mentioning such initiatives, however, tends to hide the most important change that happened in the 1980s. Instead of witnessing a disconnect between EMU and political union, the 1980s witnessed the emergence of a new school of thought among some European policymakers and, more specifically but not only, within the French government. This new school of thought was largely the fruit of the increasingly state-driven cooperation that developed since the 1970s with the European Council and the EMS. It was based on the belief that further developing the intergovernmental dimension of EMU, far from weakening the EEC’s democratic accountability framework, was actually reinforcing it. This idea was largely running against the belief, until then, that what was needed to improve the EMU’s democratic accountability framework was a reinforcement of the EEC’s supranational institutions, such as the European Parliament, the EESC, the Court of Justice, the Commission or a would-be centre for economic policy or a European treasury. Some European policymakers now advocated that reinforcing the role of the European Council and ECOFIN would allow for a more efficient democratic counterbalancing of the future independent ECB than any increase in the European Parliament’s powers.
In that process, the role of the French government was pivotal. The French government, throughout the Maastricht Treaty negotiations (and after), supported the idea of a ‘gouvernement économique’. ‘Economic government’ was designed as a way not only to counterbalance the power of the independent ECB but also to reinstate and reinforce the agency and powers of democratically elected leaders in the EU’s economic and financial decision-making process broadly speaking, in particular through the intervention of heads of state or government. French policymakers involved in the Maastricht Treaty negotiations were remarkably consistent in supporting their line. The French position was partly devised in reaction to what the French government perceived as a ‘German federalist concept of a political Europe’.Footnote 58 Instead of any federalist-inspired framework, the French government wanted to preserve the prerogatives of EEC member states’ governments. Making recommendations French president François Mitterrand on the strategy to follow, his adviser Elisabeth Guigou regularly warned against the risk of ‘a monetary power out of the control [incontrôlable] of political authorities’.Footnote 59 Guigou explained: ‘It is important to ensure that there is symmetry between monetary union on the one hand and economic union on the other, to avoid having monetary power without control and without a more general political framework. This is possible. The Bundesbank Act provides that the Bundesbank, while being independent, shall act within the framework of the economic policy decided by the Government.’Footnote 60 But as a solution, Guigou merely suggested asking ECOFIN and the European Council to provide economic policy guidelines within which the ECB would carry out its policy, and to review voting procedures in the ECB. Guigou did not mention the wider role of the European Parliament for instance. In November 1989, Guigou was even more critical:
For many, EMU is only about the Central Bank and the common currency. How is this a step towards political union? There would rather be a danger of seeing a European Bundesbank governing our destinies. Indeed, because decisions will have to be taken quickly and because it is inconceivable that a Central Bank should decide on the destiny of the Community’s citizens, a real government and a real Parliament will have to be set up in front of this Bank. This is the real challenge of the Intergovernmental Conference: to invent a radical reform of the functioning of the present Community institutions in order to guarantee both the effectiveness and the democratic legitimacy of EMU.Footnote 61
An important problem came from the fact that in the IGCs, the French government only advocated, as part of the improvement of ‘democratic legitimacy’, a narrow interpretation of the phrase by pushing for the increase of the role of the member states’ governments, not the European Parliament, or indeed any other mechanism that could contribute to enhancing democratic accountability. The French government wished to reinforce intergovernmental institutions, ECOFIN and the European Council, which would promise to stick by the unanimity rule. Alongside this ‘economic government’, the French delegation never really pushed for increased powers to the European Parliament as both national parliaments and national governments wanted to retain power. The French position, as Guigou summarised in early 1991, was to ‘give the European Council and the Council of Ministers a central role, by conferring them the full power of decision’.Footnote 62 Mitterrand even annotated in the margin of Guigou’s note that the European Council would need ‘a steady hand at the helm [tenant bien la barre]’.Footnote 63 French finance minister Pierre Bérégovoy was similarly preoccupied by keeping economic power in the hands of the European Council. While insisting that EMU and political union should go hand in hand, and that greater move towards EMU should be subordinated to progress in political union, the latter meant for him only the assertion of the ‘economic authority of the European Council’.Footnote 64 Discussing with his Italian counterpart Guido Carli, Bérégovoy explained:
We are absolutely committed to the institution, alongside the ECB, of a power endowed with genuine democratic legitimacy. The EP has a limited role and does not vote on taxes. The Commission is responsible for creating rules to implement the Treaty but its powers are derived solely from the Treaty, i.e. the Member States signatories. The Council, on the other hand, derives its powers from the national governments, which are accountable to parliaments that have been elected. There are therefore only two institutions with genuine democratic legitimacy, not three.
This leads us to believe that the European Council and the Council of the Communities (notably through the Ecofin Council and a strengthened Monetary Committee) should be at the centre of EMU, as long as there is no real federal European government, which is not even conceivable within a generation.Footnote 65
Highlighting that the French government’s position was not isolated, Carli approved Bérégovoy’s remarks. Writing to Bérégovoy, French foreign minister Roland Dumas equally confirmed that a French objective was to give the European Council in EMU ‘a leading role’ (un rôle moteur).Footnote 66 The director of the French Treasury, Jean-Claude Trichet, stood on the same line: ‘The democratic character of European integration must be guaranteed by the pre-eminent role of the European Council and the Council of Ministers. They should have the right of initiative, just like the Commission.’Footnote 67 The European Parliament was completely sidelined in this thinking. According to the director of the budgetary division in the French Treasury, Daniel Bouton, there was no need for the European Parliament to be able to give a vote of no confidence to the ECB. Bouton argued that there were already two possibilities of ‘no confidence’: the Commission before the European Parliament, and the Council of Ministers’ members taken individually before their national parliaments.Footnote 68
European Council meetings were logically the best place to witness EEC heads of state and government develop this line of argument and defend the role of the European Council as the guardian of democratic accountability in an EMU framework. Discussing the democratic state of European integration, the European Council meeting in Rome in October 1990 witnessed the most vigorous attacks against the European Parliament and in support of the European Council as an institution. Spanish prime minister Felipe Gonzalez warned: ‘Do not exaggerate the democratic deficit: I am just as democratically elected as the members of the European Parliament.’Footnote 69 Mitterrand concurred: ‘We are being modest in referring to the democratic nature of the European Parliament: we represent the most democratic element of all the Community institutions. We are here because the people put us here.’Footnote 70 Mitterrand added: ‘Democracy is here in this room. I do not need to be double checked by Baron Crespo! [the president of the European Parliament].’Footnote 71 Two months later, at another European Council meeting still in Rome, Mitterrand reiterated: ‘We, the European Council, have a democratic legitimacy. We are all elected.’Footnote 72 The decision to centralise monetary policy in an independent institution and leave economic policymaking intergovernmental against the background of a weak European Parliament was thus considered as a satisfactory democratic accountability framework. Ironically, in that context, the strongest critic of the non-democratic nature of the ECB as a fully independent institution was British prime minister Margaret Thatcher, often labelled as neoliberal. In European Councils and elsewhere, Thatcher consistently opposed the creation of an ECB as she considered that the absence of parliamentary control on the ECB was not democratic . . . and in that sense opposed the neoliberal outcome that was being devised at the EU level.Footnote 73 Like her European Council counterparts, however, she equally opposed reinforcing the powers of the European Parliament that could have provided a rebalancing of powers.
Weak Proponents, Vague Targets and Member States’ Opposition
Many European policymakers therefore articulated clearly the connection between EMU and political union. Even Martin Feldstein, heavily critical of the euro creation, stated in his famous 1997 article in Foreign Affairs that ‘the 1992 Maastricht Treaty that created EMU calls explicitly for the evolution to a future political union’.Footnote 74 What, then, can explain the failure to materialise a simultaneous progress of both? This section outlines three factors that contributed to this outcome: the weakness of the proponents, the vagueness of the target and the opposition of member states.
Supporters of political union, and more broadly the actors who contributed to democratically legitimise EMU discussions, were overall weak. The EESC, a consultative assembly, did not really weight in the debates. The European Parliament, and its economic affairs committee, weighted more, but equally suffered from several weaknesses.Footnote 75 The European Parliament’s economic affairs committee did push forward some important reports: Van Campen (1958), Dichgans (1966) and Herman (1990), to name but a few. In 1963, as the creation of the Committee of Governors was being discussed, MEP Francis Vals alerted to the issue of parliamentary control of governors.Footnote 76 In 1990 and 1991, Belgian MEP Fernand Herman criticised EMU, as it was being devised, for being too intergovernmental.Footnote 77 However, these concerns were not taken forward; and MEPs were unable to make EMU progress conditional on progress in political union. Rather, the European Parliament reacted to the agenda set by the other EEC institutions and the member states. This led MEPs to occasionally reproduce the biases of other discussions. In a January 1978 meeting of the European Parliament economic committee organised to prepare a report on relaunching EMU, MEP Brandon Rhys Williams thus exclusively talked about monetary union, when it could have been an opportunity to raise other issues.Footnote 78 When MEP Donald Bruce recalled that the Community budget needed to play an important role in that union, MEPs Schelto Patijn and Harrij Notenboom reacted by saying that it would be better for the report to focus on monetary matters only. At no point in this meeting was the role of the European Parliament in an EMU discussed. Later, in a meeting in April, the European Parliament’s economic committee referred to ‘the role played by a European Political Authority in the progress towards EMU’, but without saying what role and what authority.Footnote 79 In late 1990, the conference of national parliaments did not manage to give a great push to the topic either, despite provocative exchanges in a meeting with members of national parliaments. Henning Grove, president of the Danish Markedsudvalget (the Danish Parliament’s committee for EU related issues), thus warned that: ‘The two conferences on EMU and political union were seen as one coin with two phases and the democratic deficit could be eliminated if European Parliament’s responsibility were to be increased and if the Community legislation were controlled by Member States’ Parliament.’Footnote 80 Further internal weaknesses did not help the European Parliament’s economic committee. The turnover of its members was high, meaning that continuity was difficult. Some key figures animated the life of the European Parliament’s economic committee over the years, but these were overall very isolated. More broadly, principled calls for increasing the powers of the European Parliament abounded, but they were often devoid of practical substance. In the Hannover European Council of 1988, Italian prime minister Ciriaco De Mita said: ‘We must also strengthen European institutions including the Parliament.’Footnote 81 But he did not spell out his ideas. At the European Council of Madrid in 1989, Greek president Christos Sartzetakis said: ‘We should strengthen the role of the European Parliament.’Footnote 82 But he did not set out his views in greater detail either. Broadly speaking, ‘federalists’ advocating a greater role of the European Parliament (such as Altiero Spinelli) were progressively sidelined by ‘functionalists’ (such as Delors or Padoa-Schioppa) who considered that political union could progressively grow out of EMU.
A second reason was the unclear nature of the target. This goes back to the discussion about what should come first, EMU or political union.Footnote 83 The problem here was that the dichotomy between EMU and political union, while existing and referred to, was never a complete hindrance for the actual progress of monetary union. Monetary union was materially easy to define and set up; while the mechanisms of both economic union and, for the purposes of this article, political union were much more complex to set out. As mentioned above, part of the silence on political union was due to the fact that it could be dealt with in the very last stage of what was seen as a step-by-step process. Barre presciently explained this in July 1972 at a meeting of the European Parliament’s economic committee: ‘If the Community does not dare to take the political leap, no EMU will ever be achieved. Problems with major political implications will only arise in the final stage of achieving EMU.’Footnote 84
Further compounding the issue of the timing was the lack of clarity on what was meant by EMU itself. At different points in time, EMU could mean very different things: a unit of account, a sophisticated exchange rate system, a parallel currency or a sequence of transitory phases leading to a monetary union.Footnote 85 The 1978 Ardwick report of the European Parliament encapsulated well the complexity of this ‘moving target’:
[The EP] realizes that full monetary union with a single currency or irrevocably fixed parities is sharply differentiated from the transitional phase now envisaged, in that full union would require technical and political control over money supply and other macro-economic policies to be exercised by stronger central Community institutions, under the control of the European Parliament, instead of by national governments.Footnote 86
As a consequence, and with the exception of the IGCs of Maastricht, it was difficult to devise a plan for political union that was fit for the purposes of the unclear type of monetary union that it would complement.
During the IGCs of Maastricht, the ‘moving target’ problem set itself in a different context. The problem then was that the two IGCs were evolving at different paces. European policymakers struggled to adjust one negotiating stance in function of the other. Writing to Bérégovoy, Dumas summarised the difficulty of working with such a moving target. Given the non-contemporaneous achievements of the two different IGCs, Dumas highlighted that one would be settled before the other:
I would like, before answering each of your questions, to stress one fact: the reflection on political union is less advanced than that on EMU. As there can be no question of waiting to conclude the Treaty on EMU until the negotiations on political union have been completed, we will be obliged to define the outline of EMU in such a way as to ensure that it fits into a general framework whose final contours we do not yet know.Footnote 87
In that sense, the different paces at which the two parallel negotiations evolved were not propitious to realise a fuller ‘federal’ system ensuring genuine democratic accountability.Footnote 88
The ‘original sin’ for many federalists remained (and remains) the inability to have created European political union and/or the European Defence Community in the 1950s. Whatever the validity of that claim and the impossibility of doing counterfactual history, the lesson European policymakers drew from this episode was that the making of EMU could not wait for the achievement of political union, despite the understanding that both were going together. This was the substance of the message of Dumas to Bérégovoy quoted above. In 1986, Padoa-Schioppa, then Deputy Governor of the Bank of Italy but still closely connected to EEC discussions, summarised well the challenges of waiting for political union before EMU in an exchange with his German counterpart Helmut Schlesinger:
Of course political union should precede monetary and economic union, but this has unfortunately not been the course taken by post-war history, since the failure of the project for common defence in the early 1950s. In the name of the priority of political union should the Treaty of Rome not have been signed or the EMS not created?Footnote 89
Padoa-Schioppa did not answer his rhetorical question, since his aim in this letter was to convince Schlesinger that he was as interested in ‘monetary stability and sound economic management’ as him. But Padoa-Schioppa’s rhetorical question reflected the lesson some European policymakers learned from the failures of the 1950s, namely, that for the creation of a European ‘political union’ to be successful one day, it needs to find a starting point from a different policy field. EMU could be promising in that an EMU would need a political union to be fully functional. The pressure from urgent economic and financial events, rather than the devising of a preordained plan aimed at shielding monetary integration from political accountability, contributes to explaining the agreement to tolerate the shelving of political union while progress was being made in economic and monetary integration. Such urgent economic and financial events included most famously the breakdown of the Bretton Woods system, but also the difficult realignments and regular exchange rate crises of the 1960s, 1970s and 1980s up to the crisis of the Exchange Rate Mechanism (ERM) of the early 1990s.Footnote 90
A third and final reason that contributes to explaining the disconnect between political union and EMU at Maastricht was the unwillingness of member states to communautarise – that is, to transfer sovereignty over a specific policy area to the level of the Community – the system. The member states, in particular the large ones, rather than any particular group of neoliberals, were blocking the communautarisation and democratisation of EMU, especially at Maastricht but also before. It is true, as mentioned above, that some policymakers, especially but not only in the French government, believed that increasing the powers of intergovernmental institutions such as the European Council and ECOFIN would contribute to democratising the EMU setup. These European policymakers held that it would provide an effective counterbalancing power to the future independent ECB. Whether this indeed could be enough to democratise the European Union as designed with the Treaty of Maastricht is another question.Footnote 91
Taking at face value the argument about the legitimacy and satisfactory democratic accountability provided by the European Council and ECOFIN in the EU’s institutional setup, the problem was then a reluctance to communautarise the institutional setup or, to put it differently, to surrender sovereignty in some key areas. Jean-Claude Trichet put it plainly in preparing the European Council meeting in Luxembourg in June 1991: ‘We must refuse a total “communautarisation” of EMU.’Footnote 92 Adviser to the French president Guillaume Hannezo similarly excluded in 1990 the possibility of focusing on the Commission or the European Parliament as ways to provide a strong executive vis-à-vis an independent ECB, and called instead for a concentration on the European Council and ECOFIN.Footnote 93 The French government led the opposition of EEC member states to surrender parts of their sovereignty that would have allowed the development of a genuinely EU-wide framework of democratic accountability. EEC member states governments’ ambitions for political union were, however, not very high even before Maastricht. Under the rubric ‘democratic control’, the Guigou Report – a report devised in 1989 by the EEC member states with a view to setting out the agenda of the forthcoming negotiations – only modestly outlined the following:
How is democratic control of the new decision-making structures to be ensured:
– In general terms, would the national governments and parliaments have a specific role to play?
– Would the present roles of the European Parliament and of the European Council have to be adjusted?
– Would ‘hearings’ and periodic reports of the ESCB (which could be made public) as proposed in the Delors Committee’s report be sufficient to ensure the ESCB’s full accountability?Footnote 94
It is true that questions were open; but their formulation tended to put the bar very low for the future possible democratic setup of the Treaty. The so-called Ashford paper of the European Commission in May 1990, also setting out the priorities of the forthcoming negotiations, was not very ambitious either. The paper already acknowledged that EEC member states’ political preferences were not for the communautarisation of EMU:
Monetary union with a centralised economic union (. . .)
This centralisation would accentuate the need for a strong European parliament in order to correct the democratic deficit created by the emergence of two centralized decision-making authorities in the economic and monetary fields. The approach would imply political union of a centralist model.
This conception does not reflect the political preferences of the Community. It is at odd with the principle of subsidiarity. Nor does it take sufficient account of the diversity of Member States and their different histories and structures.Footnote 95
Even before the beginning of the two IGCs, it was therefore clear that political union would not match the level of development of monetary union, due to the opposition of the EEC member states. This last point about the opposition of member states is particularly important as it runs against a frequent confusion between the evolution of the EEC/EU as if it were an autonomous whole, and what its member states want it to become.
Conclusions
The outcome of the EEC member states’ opposition to fully developing political union at Maastricht was that the latter did not match the level of development of monetary union in the Treaty. This article argued that such a disconnect, while corresponding to a definition of neoliberalism, was however not intended to align with a specific plan from this ‘thought collective’. What explains that outcome was rather a combination of contingent factors as well as a belief, from the late 1980s, that a strong intergovernmental architecture vis-à-vis the future independent ECB would provide a satisfactory democratic accountability framework. With weak supporters, definitional and timing issues as well as the strong opposition from member states, political union did not advance at the same pace as EMU. The unwillingness to surrender sovereignty to the supranational level, rather than a conscious and deliberate neoliberal process to shield the supranational monetary union from democratic accountability, can make sense of this result.
Understanding this distinction allows for a re-evaluation of reflections about how to make EMU more democratic.Footnote 96 EMU was not primarily created with a view to shield capitalism from democratic accountability, even if its eventual setup in large part conforms with that vision. The desire to create a single European currency per se is not the problem; rather, it is the institutional setup that has been chosen. This point is central at a time when the governance of the euro gains ever-increasing centrality in the life of the EU.Footnote 97 If EMU is not intrinsically neoliberal, the focus should not be on EMU itself or related issues like leaving the euro, blaming it for all ills or discontinuing EMU altogether. Instead, debates should focus on the EMU’s institutional setup, which could be considerably improved to better address the challenges that have been misconstrued in the past.
Acknowledgements
The author wishes to thank the participants of the conference ‘Economic thought and the making of the euro’ held at the European University Institute in Florence on 27–28 April 2023 as well as the organisers and participants of the workshop ‘Democracy in the construction of Europe, 1945–2020’ held on 18–19 March 2020 for their feedback, and in particular Neil Rollings and Roberto Ventresca, as well as Quinn Slobodian and the three anonymous reviewers for very helpful comments and suggestions.
Funding statement
This project has received funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant agreement No 716,849).
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