Jack Seddon (St John's College, Oxford)
The EMU project may still be riddled with uncertainty, but some of the fog is lifting. Today, only the most uncritical Europhiles would dare to think that enough has been done to ensure prosperity and economic security going-forward, while only those rhetorically trapped by prior-grave-predictions continue to write-off the prospect that this aspiration may yet become reality. The increasingly open space in between means there is work to be done. On 11th and 12th March 2014, the Political Economy of Financial Markets (PEFM) programme, in collaboration with the Santander Fellowship at the European Studies Centre, rolled up its sleeves in response to this emergent space for debate and sponsored a unique seminar on the future of EMU governance. The seminar was entitled: 'The Governance of EMU: Recasting Political, Fiscal and Financial Integration'. The broad aim was to graft scholarly content into the on-going EMU governance debates and to add new systematic analysis that might better explain the emergent trajectories. This academic seminar, conducted as a roundtable under the Chatham House Rule, brought together economists, economic historians, political scientists and international relations experts - as well as some officials and market participants - from several European countries and the United States.
The opening session - which was on-the-record and open to the public - saw Vítor Gaspar (Bank of Portugal) introduce new research on the extraordinary achievements of Alexander Hamilton. Hamilton worked out much of the structure of the U.S. financial system through the credit crisis and panic of 1792 and other troubles that beset the early days of the federation. The parallels to the EMU project hardly need stating; but what made Hamilton such a successful leader? How was he able to coordinate (international and domestic) states and markets? The key to Hamilton's success, Gaspar argued, hinged on sound political instincts that enabled him to build broad-based coalitions, and an astute understanding of how to manage market expectations. Beyond pointing out what the U.S. has that Europe would dearly love to have (fully integrated capital markets and a political authority and social structure able to effect large fiscal transfers), Gaspar's analysis gave his audience reason to ask: at what stage is EMU at in its life-cycle? This is more than mere academic speculation. EMU is often represented as being fatally trapped by its historical legacies, while others say EMU is facing difficulties that are merely a product of its infancy – growing pains that can and will be overcome. The extent to which the early days of U.S. history offer a useful analytical point of comparison for EMU today would seem to turn crucially on the answer to this question.
The second session reflected on what it will take to put EMU into a steady and enduring state. One frequently-recurring theme was that what has been achieved so far - including in response to the crisis - can only hope to buy time. There was considerable discussion of the way EMU governance (and the EU in general) should navigate between the aspirations of the federalists and the scepticism of those who fail to acknowledge the interdependencies of the member countries. Building a "demoi-cracy" was posited as a third way which would internalise those interdependencies yet recognise that political legitimacy lies vested in national electorates - avoiding the pitfalls involved in always seeing EMU in terms of a dichotomy between extreme end-states. It was stressed by several participants that EMU demands that states internalise external objectives in domestic economic and fiscal plans.
In the third session, participants explored what might be different about the euro crisis. From a European perspective, there was agreement that recent times have brought home the distributional implications of the single currency and the wider European project. However, it is still uncertain what this will mean for national politics and party systems. When EMU is set in a wider historical framework, the answers are disconcerting. Moreover, "long and deep recessions always have profound political consequences." What are these likely to be? It may be too soon to tell, but it is possible to sketch out the important questions from the discussion. First, is EMU structured in a way that might enable it to survive or even flourish through these consequences? Alternatively, is this an article of faith rather than critical analysis? Second, are we still living with the EMU simply because European-elites believe there is no alternative? If so, what does politics mean when there are no exit options? Third, is the "political will" that undergirds the single currency really inexhaustible? If so, what is this "will" actually made of? Last, should the EMU project be pursued at any cost? Put differently, what is being obscured and implicitly risked by those prepared to make this commitment?
The final session explored some of these issues and also set out what future possibilities may exist. The bottom line that came out in the discussion will not surprise. If EMU is to thrive, rather than just survive, more sovereignty must be transferred to the supranational level. However, this will have to be achieved in the face a sceptical and hurt public, even if that public really only cares about the euro in its pocket. According to one participant, the EMU will proceed with states committing to "the least possible transfers of sovereignty necessary to secure the project." If this is indeed the case, and surely this is far from being an unreasonable expectation, then EMU really is a question of pouring a very new wine into an equally old bottle, and the outcome is likely to continue to surprise.
This discussion of EMU governance called to my mind Puchala's (1970) famous deployment of the allegory of the blind men and the elephant to describe the first decade of European integration studies. Puchala cautioned that "We have all too often found international integration discussed in terms of what it should be and what it should be leading toward rather than in terms of what it really is and is actually leading toward." The contributors to the seminar are clearly embarked upon an analytical and normative project. They are also working at a frontier in a similar way to the early studies of European integration. They can be commended for being more open about the normative aspects of their project than the early integrationists. Nevertheless, EMU was described in radically different ways depending upon what dimension was being emphasised over the two days. This observation gives reason for a moment's reflection. In my view, we need some greater parsimony and precision on what we actually mean by EMU - less the "EMU elephant" continue to grow in size and change in form whenever we are about to move from groping to grasping. I am happy to hear that the organisers of the seminar are planning a volume, and I would urge them - among other priorities - to seize the opportunity to make a seminal statement on this point. It would, in my personal opinion, be a shame to miss it.