Federalism, a Decisive Issue for Europeans. 1. Europe, a Unique but Imperfect Construction

Michel Dévoluy
Professor Emeritus in economics, holder of the Jean Monnet Chair at the University of Strasbourg

The conference on the future of Europe, organized by the European Union (EU), has now been launched. It invites Europeans from the 27 Member States to reflect, via a multilingual digital platform, on their visions of the Europe to come. The conclusions of the discussions will be drawn in spring 2022.

They will guide the development of the EU for the coming decade. It is up to citizens to use this forum to express themselves about Europe, in complete freedom.

The future of the EU hangs on the inescapable question of federalism. We need to discuss it in order to understand the ins and outs of a European federation, and to ask ourselves whether all states wish to move forward at the same pace in this direction. Hence the necessary debate on a multi-speed Europe.

The exchanges of views can focus on several themes: federalism and peace; the institutional framework of a federation; the unique dynamics of European integration; the brakes and resistance to the transition to a political Europe; the need for a federal Europe in the face of contemporary issues and challenges.

One thing is certain, the future is of concern to all of us, and political Europe is our future. But talking about the objectives and the reasons of a federal Europe is not enough. Otherwise, it would already be in place. Several obstacles have to be overcome. First, we shall free ourselves from stereotypical visions of how the world works. Then, we shall offer Europeans credible and persuasive perspectives. Finally, we shall place Europe in the mental and emotional landscape of Europeans. The need for Europe is all the more urgent as undemocratic parties are now advocating identity and nationalist retreats. Old demons still roam around, feeding on frustrations and simplistic solutions. Let us be very vigilant and determined.

Federalism and peace

Giants such as Emmanuel Kant, Victor Hugo, Albert Einstein and Albert Camus were convinced that only a federation of states would make peace stable. Noting that the juxtaposition of independent and sovereign countries was a systematic source of antagonism and conflict, it was necessary to change the approach. The signing of peace treaties and appeals to reason have never been enough. Moreover, wars are always started to defend causes deemed just by the protagonists. There is, depending on the case, to defend the security and honor of the citizens, or to obey the “reason of State”. Getting out of these deadly gearboxes for good and making wars impossible calls for the creation of a federation of states.

Ideally, universal peace requires a world federation. While waiting for such a distant accord, let us salute two major advances. First, the creation of international organizations designed to defuse conflicts: the League of Nations (League of Nations) between 1919 and 1945 and then the UN . Later, the launch of the European construction, initiated on May 9, 1950, by the historic declaration by Robert Schuman. The stated objective was to make peace stable in Western Europe with the Franco-German reconciliation as the top priority. The first concrete achievement was the creation of the European Coal and Steel Community (ECSC) in 1951.

The search for an appeasement through the elimination of the reasons of war reveals the impossibility of definitively sealing the peace on the sole basis of goodwill, fine speeches or the signing of peace treaties. Longing, even earnestly, for peace is far from enough. Several conditions must be fulfilled to eliminate the reasons of conflict. States and their citizens must share values, have converging interests, accept forms of material solidarity, adhere to a unifying narrative and feel united and protected within clear and recognized borders. In short, states and their citizens must identify with a common political, economic and social space called a federation of states. Of course, pre-existing identities do not disappear, because each citizen continues to belong to his state. But a new, more encompassing identity is added to the previous ones.

At this point, two observations stand out. Building a world federation to achieve universal peace is not yet on the agenda. In contrast, the EU has come a long way. This victory of peace must be constantly remembered with gratitude towards all the craftsmen of Europe. Let us not play this achievement down.

Federalism, a constitutional regime

A federation of states is characterized by two levels of sovereignty: the member states and the federal state. Each Member State has its government and its clearly identified political space. The federal government presides over and coordinates the whole. The division of powers between the two levels follows several guidelines: concern for common interests, solidarity between Member States, safeguarding of diverse identities and respect for democratic principles. In practice, the so-called “subsidiarity principle” offers a good method for transferring responsibilities between the two levels. The federal state performs the tasks of and takes over all areas that cannot be effectively carried out by the member states. According to this principle, it seems logical that the federal state should deal with supreme-sovereignty issues, especially foreign policy and the army.

Furthermore, no decision of a federal nature can be blocked by the veto of a Member State. Otherwise, we fall back into an inter-state approach where each state wishes to retain full control over its national sovereignty. In order to function well, a federation must also have a powerful Constitutional Court independent of political pressure. Its mission is to guarantee the constitution and to arbitrate conflicts between all the institutions of the federation.

Switzerland, Germany, Canada, Brazil, Australia and India are examples of federations. There are about 30 of them out of the 195 states sitting at the UN. For two and a half centuries, the United States of America (USA) has been the benchmark federation. It is therefore interesting to recall that the British colonies, which became independent in 1776, first associated themselves into thirteen autonomous republics. They all intended to preserve their sovereignty, especially in matters of foreign and fiscal policies. But this institutional arrangement quickly pushed these republics into noxious rivalries. They were also becoming incapable of standing up together in the face of external threats. A change was called for. After vigorous discussions to devise the best possible arrangement, the Philadelphia Convention of 1787 chose its constitution on behalf of the American people. The first federation in history was born.

So, it took about ten years for Americans to convince themselves of the advantages of a federation. Even if a comparison is not a reason for, Europeans must learn from this founding period, but also address the great failure of American integration.

The Civil War (1861-1865) is a reminder that a federation that does not share essential values and the same objectives remains fragile and can break up. But since that confrontation, the strength of the USA has been proven. The federated states are now looking in the same direction, agreeing to pay federal taxes, accepting mechanisms of solidarity and defending themselves under the same banner. The proof: all citizens of the 50 states are proud to be Americans.

Compared to a full-fledged federation, the EU is unique. Governed by treaties rather than by a constitution, it is essentially intergovernmental. But at the same time, the EU has got attributes of a federation. First, by having certain own competences. Then, by having a decidedly federal jurisdiction, the Court of Justice of the European Union (CJEU). Nevertheless, the absence of a government of the European people clearly identifiable by the citizens is enough to show that the EU is still far from being a complete federation. Moreover, European democracy remains weak and the perception of the EU by many Europeans remains vague.

Two noticeable features point to the intergovernmental nature of the EU: the key role of the European Council and the unanimity rule (each Member State can veto a decision).

The broad political orientations of the EU are exclusively determined by the Heads of State and Government of the member states within the European Council. In other words, the decisive choices for Europe are made by the Member States. Here, the Commission is only responsible for transcribing these broad guidelines into legislative texts. Which will then be voted on by the European Parliament and the Council of Ministers.

Treaties are very picky about the unanimity requirement of member states. Each of them can say no in order to protect its supposedly vital interests. The veto mechanism explicitly targets decisions in fiscal, budgetary and foreign policy matters. Thanks to the veto, the EU states also retain control over mechanisms of redistribution and social protection. In short, the veto is the symbol of the maintenance of national sovereignties. However, the EU has several federal dimensions. They are embodied in specific institutions and competences. The Commission, the European Parliament, the CJEU and the European Central Bank (ECB) are institutions of a federal nature. All of them act on behalf of the European people.

The management of the single market and the trade policy of the Union fall within the so-called “exclusive” competences of the EU. They are dealt with by the Commission. With regard to the euro zone, its monetary policy is ensured, in full sovereignty, by the ECB. There is a particular problem here, since only 19 States out of the 27 members have adopted the single currency.

The EU is therefore a very special institution. It is akin to a federation of states that share limited elements of their sovereignty. But the EU remains anchored into an intergovernmental logic. Each Member State intends to remain in control of traditionally-national matters, in particular finance, defense and foreign policy. The single currency therefore has a special place here, with a strong practical and symbolic significance.

Let’s be clear, the current EU is based on treaties signed between sovereign states. The transition to a federal state will necessarily require a constitution written in the name of European citizens.

The unique dynamics of European integration

For 70 years Europe has progressed according to an original dynamic. In the aftermath of a fratricidal war and centuries of internal rivalry, the Europeans were not ready to create a federation from scratch. People do not twist the course of history with a constitutional coup. The Fathers of Europe as a Community understood this. The method chosen to advance and consolidate the harmony between Europeans was that of small steps. It was necessary to get used to co-operate in certain areas in order, step by step, to widen the sphere of common interests. At the end of these ripple effects, a form of political federation would emerge. But when?

Initially (1951, ECSC Treaty), the six founding states chose to jointly manage the coal and steel production, which were then the sinews of the economy and of war. The second step (1957, EEC Treaty on the European Economic Community) was the construction of a customs union favoring the free movement of goods between the Member States. This founding treaty also launched the most significant European policies regarding agriculture and regional cohesion. The next big step (1986, the Single Act) created the European Union and established the single market, with the abolition of internal borders for workers and capital. Until the introduction (1993, Maastricht Treaty) of the single currency, with its actual creation in 1999. The Economic and Monetary Union (EMU) had been accomplished. But can we now do without a political union?

The EU now faces a mismatch. Political integration has not gone in parallel with the economic and monetary integration. The former stammers and hesitates, as the member states are clinging to their national sovereignties. While the EMU is completed. The negative consequences of this imbalance are considerable. Sharing a single market and, above all, a single currency implies a unified management of the economy. A federal-type government is imposing itself. Without this, either the construction will disintegrate quickly for lack of coordination and common goals. Or the states concerned agree to adopt rigorous and binding co-ownership-regulations for their single currency, in order to bring all national policies into coherence. This is exactly what is written in the treaties signed by the member states.

But then, what a paradox! To preserve their political sovereignty, the States impose rules that alienate all of their monetary sovereignty and part of their economic and budgetary sovereignty.

In the euro zone, the monetary policy is one. Therefore, the states concerned necessarily align themselves following a unified monetary strategy. A consensus emerged, a sort of “political common denominator”: to create an ECB independent of political powers, and give it as its main objective the maintenance of prices stability throughout the zone. So, in the absence of a political union, the room for maneuver of the single monetary policy is still limited.

As for national economic policies, they are subject to two types of constraints. On the one hand, a strict framework for public finances through the Stability and Growth Pact (SGP) and the Treaty on Stability, Coordination and Governance (TSCG, signed in 2012). On the other hand, multilateral surveillance of national economic policies carried out by the Commission by means of control procedures and incentives. In both cases, national sovereignties are in check.

Let’s sum up. In order to maintain national sovereignty at all costs, the dynamics of European integration has focused on the economy and the currency. This process completed, Europe must choose. Either hold fast to national sovereignties, which amounts to undergoing a tight control of national economies. Or resolutely take the path of federalism, which seems wiser and more rational. The Europeans still need to be convinced.

Historically speaking, the EU is an ambitious and exemplary construction. But it remains unfinished. Its member states, laden with their own stories and always magnetized by the notion of national sovereignty, do not dare to take the step of federalism. By remaining in the middle of the ford, the EU is unable to fully deploy itself in the service of its citizens and its Member States. But in order to progress, it is necessary to identify the obstacles.

Ed. Note – The second part of this article will be published in the next issue.