On 12 June 2008 the Irish voted no to the Lisbon Treaty and threw the European Union into yet another political crisis. Already the next day my co-blogger Philip Lane discussed some reasons for the no vote. The big question mark hanging over the Irish EU referendum is whether the voters have actually decided on the referendum question or whether they have taken the opportunity to voice their protest over various domestic issues.
The trouble is that citizens in different EU countries have so often voted no to new EU initiatives, when they have been given a change. This was precisely what the French and Dutch voters did when they voted no to EU Constitution in 2005, which again was the reason why the Constitution was repacked as the Lisbon Treaty, and why all countries, except Ireland, decided to skip national referendums and instead ratify the Treaty in their parliaments.
The Lisbon Treaty has not much to do with economic policy-making per se. The Treaty is essentially meant to streamline decision-making within the EU and to give the Union more clout internationally. Among the many changes to that end are the introduction of an EU president (“President of the European Council”) and foreign minister (“High Representative of the Union for Foreign Affairs and Security Policy”). The number of commissioners is slated to be cut and, as a consequence, countries will only send commissioners to Brussels on a rotating basis.
I have never liked the idea of an EU president, and I am afraid that the public engagement in EU matters will fade further when each country ceases sending a commissioner to Brussels at all times. The president will be elected for a two-and-a-half year term by the members of the European Council, i.e. by the prime ministers of all EU countries. The president will not have to be approved by the European Parliament.
The introduction of a strong president with limited accountability to directly elected politicians is not in line with West European traditions. Western Europe has a tradition for parliamentarian systems, where the head of government is elected or approved by parliament. Political science research shows that parliamentarian systems only stay democratic if subjected to elaborate systems of checks-and-balances. Looking for a minute at my own part of Europe, it is noticeable that basically all the countries that introduced parliamentarian rule after the break-down of communism are now democratic, whereas most countries that introduced presidential systems are undemocratic.
There are, however, also economic arguments for being worried about the organisational setup of the Lisbon Treaty. In a recent paper, Antonio Fatas and Ilian Mihov show that countries with presidential systems and with limited checks-and-balances exhibit particularly frequent and/or large government spending shocks. The more erratic fiscal policies subsequently lead to more macroeconomic instability – and to lower growth. In other words, a strong and unconstrained leader in front may reduce political conflicts and simplify decision-making, but it is the wrong decisions that are being made! My conjecture is that this result applies not only to fiscal policy.
I would hope that the Irish no to the Lisbon Treaty would be used to rethink the organisational changes of the EU and its decision-making bodies. A flatter and more inclusive EU would not only enhance democracy in Europe, but possibly also economic performance.
Reference: Fatas & Mihov (2003): “The Case for Restricting Fiscal Policy Discretion”, Quarterly Journal of Economics, vol. 118, no. 4, pp. 1419-1447.