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The legality crisis in the European Union

Protest against corruption in Bucharest.
Protest against corruption in Bucharest, Romania in 2017. PHOTO: Mihai Petre, Wikimedia Commons.
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Written by Pertti Koskela

Contents

Introduction

The EU is facing the worst crisis in its history

The EU is in a worse crisis than ever in its history. The crisis is structural. It is a crisis of legality.

The crisis is not accidental, nor is it the result of the conscious actions or inactions of individuals, social or interest groups, political parties, etc. It is a social product of the current historical era and as such inevitable.

States tend to violate their laws and international treaties. This is also true of the EU. Democratic states are able to admit it in individual cases – although usually only as a result of pressure from public opinion and decades later.

In the EU, these illegalities are facilitated by the fact that, according to the Treaties, EU decision-makers and officials are not criminally liable for their official duties. The EU has no legislation nor authorities to investigate their malfeasance in office.

The EU Treaties have been regularly breached, notably in the context of the eastward enlargement and the creation of the monetary union, without fear of punishment.

In connection with the preparations for the EU recovery fund in the summer of 2020, even the President of the Republic of Finland, Sauli Niinistö, who is generally very positive about the EU, criticised the fact that the EU Treaties “have been gradually eroded by individual solutions. – – An interpretation has become a treaty.” [1]

The EU has lost its legal basis. Decisions that violate the Treaties have gained legitimacy from the fact that they have been adopted by the member states, which supposedly are governed by the rule of law. Since 2004, this argument has no longer been valid. At that time, eight Eastern European countries were admitted as EU members, although the functioning of the judiciary in them was not properly examined during the accession negotiations. Three years later, Bulgaria and Romania, which were not rule-of-law states, were admitted. Developments in Poland and Hungary in recent years show that they are not rule-of-law states either.

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The Program of the New History Association as a printed booklet and an e-book. It contains Part 1, 2 3 on these pages, as well as a presentation of Matti Puolakka’s lifework and of the Association.

If you think our views are important, even only as questions, buying the Program pamphlet is one possible way to support our work. (The cover image is linked to Amazon.)

As a result of persistent breaches of the Treaties, EU citizens have begun to feel a growing mistrust of the EU. Brexit is the most significant and dramatic demonstration of this. There was reason to be suspicious. It explains the support for the lies presented by the Brexit side.

After the Brexit referendum, the then President of the EU Commission, Jean-Claude Juncker, said the EU was in an “existential crisis”. [2] The assessment was correct. But since then, the EU has continued as before. The legality deficit has not been addressed, and the Treaties continue to be violated. The EU recovery fund may be necessary, but while curbing the EU’s tendency to disintegrate on the one hand, in particular by supporting the Italian economy, it is causing even greater dissatisfaction on the other, as it is in breach of the EU Treaties.

If justice perishes, human life on Earth has lost its meaning.

EU citizens want the EU to survive – but how?

Despite the negative aspects of the legality deficit, the vast majority of EU citizens are positive about the EU and, surprisingly, also the euro. [3] The creation, enlargement, and development of the EU are widely seen as worthwhile.

However, a recent survey shows that dissatisfaction with the EU has increased. [4]

According to the same survey, EU citizens want to see the EU first and foremost as a defender of democracy and human rights – the growing legality deficit is the main obstacle to fulfilling that role.

“...there will be a new and wiser one.”

We believe that the EU is capable of reform, of recognising, apologising for and making amends for the illegalities it has committed. Reforming the EU requires reforming the Treaties. In what way? How to get the changes through? – No one knows nor can know.

But whatever the way the Treaties are changed, it can only be done on the basis of a broad public debate. That is also the will of the overwhelming majority of EU citizens. According to a recent poll, 92 % of EU citizens think they should have a greater say in deciding the future of the EU. [5]

Lech Walesa, the former Nobel Peace Prize winning leader of the Solidarity Trade Union and President of Poland, said in an interview after the Brexit referendum that “if you smash the EU, in five minutes, there will be a new one, but wiser”.[6] – Walesa has a sense of history.

This is true despite the fact that the EU has been ‘smashed’ above all by the EU leaders themselves.

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Background: the EU as a phenomenon of the age

The EU crisis is a form of the global crisis of democracy. The legality deficit in the EU reflects the essence of the era: the central conflict in today’s world is between the rule of law and the tendencies of illegality. The former is driven above all by enlightened public opinion, the latter by global speculative financial capital.

The basis of the EU is in the golden age of capitalism

The EU was built on the ‘golden age of capitalism’ in the West after the Second World War: Economic policy was Keynesian. Banks were nationally owned and financed national economic activity. In the capital-owning circles, industrial capital was dominant. Trade unions were strong, and the state mediated conflicts between workers and employers. The rule of law strengthened, democracy expanded, living standards rose, and social security improved.

The precursor to the EU was the Coal and Steel Community of six European countries established in the early 1950s. It had many goals, but the most important was stabilising a state of peace in Europe, particularly between Germany and France. That objective has been achieved. It is difficult to imagine military confrontations between the EU member states today.

The quality of life in the EU’s old, western member states is on average better than in the rest of the world, with higher life expectancy, better living standards, smaller income disparities, stronger democracy and civil rights, etc. That background means that the EU has a strong tradition of legality, democracy, and civil rights.

From the 1980s onwards, Western Europe began to develop integration based on a single market in response to the challenges of the information technology revolution and globalisation.

The essence of the era

With the information technology revolution, speculative financial capital came to dominate the world economy. Investors, the “market forces”, largely determine the activities of large corporations. Market forces also put pressure on states to “race to the bottom”.

Eira hospital in Helsinki, Finland.
Public healthcare was developed in all Western European countries after the Second World War. In Finland, public funds are also used to finance private health services. The picture shows an Art Nouveau building in Helsinki from 1905, which still houses a private hospital. PHOTO by Matti Similä – Finna / Wikimedia Commons.

Speculative financial capital needs the rule of law to safeguard its profits; on the other hand, it seeks to pressure policymakers to deregulate its activities. In the worst cases, speculation leads to outright illegality, as happened in the financial crisis of 2008. Even in advanced democracies, the rule of law in its current form is unable to prevent them.

The dominance of speculative financial capital is the root cause of the crisis of democracy not only in the EU but also in the US, for example.

History has not ended

The ‘end of history’ view of the American historian Francis Fukuyama, presented in his book of the same name, summarised the enlightened understanding of the historical situation after the collapse of the Soviet Union.

Fukuyama himself has later stated that the message of his book has been interpreted too simplistically. His conclusion was that humanity would not come up with a better system than democracy and capitalism. [7]

Fukuyama was mainly right. A democratic market economy with the rule of law is the only system to build on, even if it requires profound reforming.

Instead, the simplistic and superficial interpretations of Fukuyama’s vision were erroneous. According to them, Western democracy had achieved its final victory and no longer faced external or internal threats. And to implement Western-style democracy in any country, it would be sufficient to conduct free elections, enact laws following the Western model, and create a market economy through privatisations. There would be no need to pay particular attention to building the rule of law.

This simplistic ‘end of history’ doctrine created the conditions for the growth of the power of speculative financial capital: borders were opened, deregulation took place, state assets were privatised, the market economy expanded.

The EU was reborn in the 1990s on the basis of that ‘end of history’ doctrine. The process can be seen as an expression of collective self-deception. The European decision-makers involved deceived not only the citizens of their countries but also themselves.

Europa building in Bruxels.
The Berlaymont in Brussels, the headquarters of the European Commission. PHOTO: Piqsels.

In reality, the doctrine that underrates the rule of law has pushed the world to the brink of destruction, as evidenced by the financial crisis of 2008, the euro crisis of 2010, the refugee crisis of 2015, Brexit of 2016, the Covid-19 pandemic and the vaccine nationalism of the world’s rich countries, Trump’s attempt to overturn the outcome of the 2020 US presidential election, the inadequate action of democracies to counter the threat of climate catastrophe, the chronic threat of financial crisis, the failure in nation building in Afghanistan, etc.

The crisis of Western democracy reflects a new beginning in history. The dominant system has faced new challenges. The most important of these challenges is the threat to the rule of law, although it takes very different forms in different countries.

The EU’s legal deadlock

The EU’s legitimacy is breaking down

The EU is a new type of political-administrative structure, with features of a union of sovereign states, an international organisation, and a federal state. However, both the EU Treaties and structures lack many essential elements of a democratic rule of law.

First, EU officials are not criminally liable for their official duties. Secondly, the EU Commission, which is made up of civil servants, has legislative powers that go against the principles of parliamentarism.

Legal scholars have argued that the EU derives its legitimacy from the member states, which are governed by the rule of law. All major decisions require the approval of the governments and parliaments of the member states.

This argument is now, at the very latest, flawed as there are countries in the EU that cannot be considered rule-of-law states, and there is no way of stopping actions that are aimed at undermining the rule of law in the member states.

In the EU, the problem is fatal because the EU Treaties go above national constitutions in many essential respects. The EU is a legal hybrid, reflecting the profound transformation of the era. It is a transitional phenomenon that can hardly survive in its present form. On the other hand, it cannot break up – at least we do not hope so: it would probably drive many of the current member states into chaos.

Background: the EU is a historically new type of political-administrative structure

In the autumn of 1991, The European Round Table for Industrialists (ERT), leaders of 45 major European companies, published a report on the reform of Europe. Their goals included completing the single market, EU membership for Eastern European countries, and a monetary union. And because of global competition, there was a sense of urgency: “There is no time to lose.” [8]

So, it was the business world that was driving the EU’s rapid and extensive enlargement to the East and the establishment of the monetary union. The rush did not serve the interests of citizens.

The EU we know today was created by the Maastricht Treaty in the 1990s. It is a structure that could not have been created before. Its creation was no accident. The EU is a social product of a new historical era.

European finance capital and big business wanted as much economic integration as possible. However, the majority of EU citizens opposed the federalisation of the EU.

The Treaty of Maastricht on display in Rome.
The Treaty of Maastricht on display in Rome in 1997. PHOTO: European Commission, Wikimedia Commons.

As a result of that cross-pressure, the EU has features of a genuinely democratic market economy based on the rule of law, but also of a ‘semi-democracy’ serving the interests of speculative finance capital – a system with formally free elections but no proper rule of law.

These features are reflected in the Maastricht Treaty and, subsequently, in the Lisbon Treaty, which entered into force on 1 February 2009.

“Fundamental values” depend on the political cycle

Article 2 of the Lisbon Treaty states:

”The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the member states in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.” [9]

According to Article 7 of the Treaty, a member state may be penalised if it violates the “values referred to in Article 2” of the Treaty. [10]

However, the definition of “values” is completely arbitrary. How is it assessed whether a member state violates “tolerance” or “freedom”? In reality, deciding when and how these “values” are violated will inevitably depend on the political climate. Politicians make the decision. It is not a binding decision of an independent court.

State constitutions may set out objectives, ideals and values which are not precise legal concepts. For example, “liberty, fraternity, equality”, which is enshrined in the French constitution. But the rule of law is neither an ideal nor a “value”; it is a legal-philosophical concept implemented in the constitution and other legislation linked to it.

What is essential is that all official activity is based on the law, that every head of state and official is subject to judicial review, that they can be prosecuted and convicted for illegal acts committed in office, and that the courts dealing with their actions are independent. ­

The rule of law has long ideological and historical roots, and it has developed and refined over the course of history. What is at the heart of the rule of law – that is one of the main topics of debate in today’s world. In this context, the differences between Anglo-Saxon and continental legal traditions should also be taken into account. We believe that both traditions require reform, as the challenges of the era apply equally to both.

The shortcomings of the legality control

The rule of law means that the law defines the jurisdiction of each authority, the prosecuting authority and the penalties in the event of a breach of the law.

To speak of the rule of law as a ‘value’ in the EU is to completely obscure the legal-philosophical content of that concept. Above all, it obscures the fact that there are no clear articles on the judicial review of EU authorities.

The application of the articles of the Treaties is decided by officials who are not criminally liable for their official duties. This is the basis of the EU crisis.

There are also articles in the Treaties that are clearly worded, but they are also being violated. (See, for example, Article 125 [11] of the Lisbon Treaty, discussed below).

The EU Treaties have become objects of political bargaining. Member state governments have to explain their breaches to their citizens in the best possible terms, which tends to undermine the credibility not only of governing parties but of politics in general.

The EU’s judicial authorities

The role of the EU Court of Justice is to ensure that the EU law is applied in the same way in all member states and to resolve conflicts between EU countries and EU institutions. In some cases, individuals, businesses and organisations can bring complaints to the EU Court of Justice. [12]  There is no criminal court in the EU and, therefore, no independent body to deal with misconduct by EU officials in the performance of their duties. Judges at the Court of Justice are civil servants and, like other EU officials, are not subject to the same kind of review of legality as judicial authorities in countries governed by the rule of law.

That is why the EU Court of Justice has been able to make decisions on political grounds. An example of this is its position on the establishment of the European Stability Mechanism (ESM).

Euromaidan protest in Kiev, Ukraine.
Ukrainians wanted closer relations with the European Union – hence the 2013–14 uprising was named Euromaidan. PHOTO: Evgeny Feldman, Wikimedia Commons, CC BY-SA 3.0,

There is a lot of other kinds of scrutiny in the EU: the European Anti-Fraud Office (OLAF) investigates possible fraud and corruption in the EU institutions and agencies, the European Court of Auditors (ECA) investigates possible misuse of EU funds, and the EU Ombudsman investigates complaints about maladministration in the EU.

In June 2021, the EU Prosecutor’s Office, EPPO became operational. Its mission is to investigate crimes against the EU budget, such as fraud, corruption, and cross-border VAT fraud. [13]

The highest civil service body, the Commission, can apparently walk all over these institutions. This happened, for example, in the context of eastward enlargement in 2006, when the ECA expressed concerns to the Commission about corruption in Bulgaria and Romania. EU officials are vulnerable to political pressure because they are not comprehensively accountable.

The development is difficult to stop

The possibility of a serious crisis of democracy in the member states was not taken into account when the EU’s structures and treaties were created.

There are no rules on a country’s dismissal from the EU. The authors of the Treaties and the political decision-makers in the member states who adopted them imagined that democracy in the EU member states could not be threatened by, for example, the rise to power of a demagogic leader or an authoritarian party, or the gradual corruption of a country. – Collective self-deception, blind faith in the ultimate triumph of the then form of Western democracy, led to the EU now being virtually powerless in the face of the ‘illiberal’ developments in Hungary and Poland. [14]

The legality deficit in practice – 1: the eastward enlargement

The Copenhagen criteria – which were not respected

The most important membership criteria for EU candidate countries, the so-called Copenhagen criteria, the ‘political criteria’, were enshrined in the Maastricht Treaty. They are the same as the ‘fundamental values’ of Article 2 of the Lisbon Treaty. Meeting these criteria – above all, the existence of the rule of law – was a precondition for opening accession negotiations, i.e. for an applicant country to be accepted as a candidate.

It is clear from the reports drawn up by Commission officials on the applicant and candidate countries that they did not examine at all whether the prosecutors and judges in the candidate countries and the authorities supervising them complied with the law.

And no wonder. When the Copenhagen criteria were adopted, Commission officials were given no uniform instructions on how to examine, for example, the functioning of the judiciary in the applicant and candidate countries. The Commission’s reports on those countries show that their authorities were allowed to testify in their own case as regards the functioning of the judiciary.

The result was that corruption could run rampant also among the judiciary [15] of the applicant and candidate countries and that privatisations were accompanied by gross illegalities and outright looting of state assets.

Commission officials assessing developments in the applicant countries argued in their autumn 1998 reports that both Bulgaria and Romania were (with some reservations) rule-of-law countries and thus ready for membership negotiations. [16] Most of the other applicant countries had been identified as rule-of-law countries already a year earlier.

We have first-hand experience of Estonia, where our property was looted through a press slander campaign and a Kafkaesque show trial. This happened at a time when Estonia’s EU negotiations were underway, and the EU officials were aware of the case because we contacted the Finnish, Estonian and EU authorities. – Estonian law, as such, met the requirements of the rule of law, but still judges could make totally illegal decisions, and judicial authorities could justify them with one absurd explanation after another. [17]

The President of the Estonian Supreme Court, Uno Lõhmus, argued in an official letter (2003) that the Supreme Court had no jurisdiction to prosecute a judge who had deliberately made an illegal decision. He urged to turn to the local police. However, according to the Estonian Constitution, only the Supreme Court, in conjunction with the President, has the power to prosecute a judge. A judge’s deliberately illegal decision is a severe offence, for which the Estonian Criminal Code provides for 5–10 years’ unconditional imprisonment. PHOTO: The Supreme Court of Estonia. Ivo Kruusamägi, Wikimedia Commons, CC BY-SA 3.0.

The EU’s financial controller, the ECA, said in a July 2006 report to the EU Commission that Bulgaria and Romania need more time to prepare for membership so that EU money “could be absorbed in a correct way”. The Finnish Commissioner for Enlargement Olli Rehn argued that by then it was “too late – – the political decision for Bulgaria and Romania to join by 1 January [2007] has been taken by the member states, upon recommendation by the European Commission”. [18]

Mr Rehn, one of the EU’s top officials, thus declared that the EU Commission had recommended a breach of the EU Treaty, and since it had been adopted by a “political decision” in the parliaments of some member states, it had to be accepted.

Moreover, Mr Rehn’s claim that it was “too late” was not true. The accession of Bulgaria and Romania had not yet been accepted by all member states.

The ECA kept its report secret. Thus, it contributed to the cover-up of illegalities by other EU officials. It also failed in its own duty by allowing EU funds to be handed over to the corrupt Bulgarian and Romanian authorities.

In the context of eastward enlargement, the EU Commission and its officials ignored the most important criteria: membership negotiations were opened with countries that were not governed by the rule of law, and those countries were subsequently accepted as members, even though they were still not governed by the rule of law.

We believe that the EU Commission and its officials were operating under the same collective self-deception as the political decision-makers in the EU member states: political criteria are essentially a formality, because when the ‘end of history’ comes, the rule of law will inevitably and automatically be established.

The message to the decision-makers of the new member states was that the EU’s ‘fundamental values’, including and above all the rule of law, are a phrase that is mainly of significance for solemn speeches.

Bulgaria and Romania, Poland and Hungary...

Bulgaria and Romania came under the Commission’s special scrutiny when they joined the EU in 2007. Special monitoring was certainly necessary since the countries‘ membership aroused justified astonishment even before it became a reality. Even Romania’s then President Traian Basescu stated in 2005, two years before accession, that “virtually all institutions of the state are affected by corruption” and ”Romania will not yet be prepared to meet the European Union’s standards”.[19]

However, the EU Treaties do not recognise such ‘second-class’ member states under special scrutiny: if an applicant country does not meet the most important – political – criteria, it should not even be allowed to start accession negotiations.

Bulgaria and Romania are still hardly rule-of-law states. However, Bulgaria was exempted from the Commission’s special monitoring in autumn 2019, Romania was not.  The decision to end the monitoring for Bulgaria was presumably as political as the Commission’s assessment 20 years earlier that the countries were governed by the rule of law. According to Transparency International, both Bulgaria and Romania were more corrupt than Belarus in 2019.[20]  Keeping the countries under scrutiny has been an embarrassing reminder to the Commission that the eastward enlargement was carried out in violation of the Treaty. Romania remained on the watch list, presumably because the ruling party’s attempt to relax corruption laws attracted embarrassing attention in spring 2019. [21]

But serious corruption is not the only issue that questions the ending of the special scrutiny for Bulgaria. In terms of press freedom, the country was ranked 112th out of 180 countries in 2021, according to Reporters Without Borders.[22]  It is noteworthy that in 2002, at the time of the accession negotiations, the country was ranked 38th but fell to 51st when accession took place in 2007. [23] The downward trend began when it became clear to the country’s leaders that the country would be accepted for membership regardless of the ‘political criteria’, and it is still continuing. – History certainly did not end.

Developments in Poland and Hungary show that Bulgaria and Romania were not the only Eastern European candidate countries that needed ‘special monitoring’. In fact, the situation in those four countries alone suggests that enlargement was a gross failure in the most important respect – the development of the rule of law.

Most of the EU’s eastern member states lagging permanently behind in economic development

The economies of most of the EU’s eastern European member states developed rapidly until the 2008 crisis. Income inequalities with western member states narrowed. Since then, progress has been slower, and income inequalities have, in some cases, started to widen again. Economic convergence appears to have stalled. [24]  In addition, the economic development of some eastern member states is being held back by the decline in population as a large part of the working-age population has moved westwards. [25]

Thus, the main benefits of EU membership have accrued to the economies of Western Europe – on whose terms the eastward enlargement was carried out.

But the benefits to Western economies are also questionable. As such, large income disparities between countries operating in the same internal market are likely to increase corruption and, for example, labour exploitation, both in the East and the West. Such conditions are not conducive to the development of a modern economy.

The legality deficit in practice – 2: monetary union and the Stability and Growth Pact

Establishing the monetary union through “creative accounting”

Members of the monetary union had to meet several economic criteria related e.g. to inflation, budget deficits, and public debt. The conditions for membership of the monetary union were included in the 1997 Stability and Growth Pact, which was supplemented in the 2000s.

However, a number of countries that did not meet the criteria were admitted to the union. The newspapers wrote extensively about the ‘creative accounting’ practised by the candidate countries. It later emerged that some member countries were falsifying their economic statistics with the help of large international banks. [26]

If the criteria had been adhered to, the monetary union would not have been created. Economist Paul de Grauwe has calculated that less than half of the original euro countries met the criteria for membership in 1998. [27]

The result of abandoning the membership criteria was that countries with very different economies joined the single currency. Both supporters and opponents of the EU and monetary union are unanimous that without a common economic policy, i.e. income transfers, it creates difficulties for the economically weaker member states.

The then German Chancellor Helmut Kohl later said that the monetary union in Germany would not have passed in a referendum and that he, therefore, pushed the project through “like a dictator”. [28] In fact, the real dictator was German big business, whose interests have been served by the creation of the monetary union.

In Finland, too, joining the monetary union was carried out against the will of the majority of the people. A large part of the population did not know that the referendum on EU membership in 1994 was also a referendum on joining the monetary union. Had they known, they would have voted against EU membership. [29]

Indeed, under the cross pressure between public opinion and the economy’s demands, the monetary union became just a monetary union, leaving the responsibility for economic policy to national decision-makers – a combination that proved fatal for the economically weaker member states. They were no longer able to improve their competitiveness by devaluing their currencies. Between 1970 and 1999, for example, the Italian lira had lost 80% of its value against the German mark. [30]  After the changeover to the euro, that competitive advantage no longer existed. Instead, countries could become even more indebted, as banks calculated that EU decision-makers would not allow any member state to go bankrupt. They were right: for example, more than 95% of the first EU ‘rescue packages’ for Greece went to international (i.a. French and German) banks. [31]

Stability and Growth Pact to narrow the gap between euro area economies

The Stability and Growth Pact, in practice economic discipline, was intended, among other things, to harmonise the economic policies of the member countries and reduce the differences between their economies. It has not succeeded.

In fact, the differences between the northern and southern member states have only widened. An IMF report published a couple of years ago put it like this: ”– – real convergence of per capita income levels has not occurred among the original euro area members since the advent of the common currency”. [32] The problem has worsened during the Covid-19 pandemic, especially in Italy.

The Covid-19 pandemic provided a legitimate reason to formally abandon the limits of the Stability and Growth Pact; in practice, deviation from them was the rule rather than the exception already before the pandemic.

The EU’s monetary union has fundamentally failed in its objective of bringing member states’ economies closer together. It has increased the pressure for income transfers between countries and thus for a breach of the Lisbon Treaty through ever broader interpretations of the articles.

Differences are reduced with new measures breaching the Lisbon Treaty

The single currency has contributed to repeated difficulties for economically weaker euro countries. Various support mechanisms have been set up to help them, even though Article 125 of the Lisbon Treaty prohibits joint liability, i.e. the member states being liable for each other’s debts.

These support mechanisms have been justified by downright absurd interpretations of the Lisbon Treaty. The Court of Justice’s rationale for the European Stability Mechanism (ESM) is perhaps the clearest example.

In November 2012, the Court of Justice ruled that creating the European Stability Mechanism (ESM) to provide support to the countries in crisis will not violate Article 125. The Court invoked Article 122, which states that “– – the Council of the European Union may grant, under certain conditions, such assistance to a member state which is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control.” [33]

An empty terrace in Helsinki.
An empty terrace in Helsinki, Finland, during the Covid-19 restrictions - normally filled with tourists. PHOTO: New History Association.

The Court’s position was, of course, absurd. An independent country can always influence its economy. In the EU, economic policy is a matter of national decision. And the crisis in the member states was not caused by any ‘exceptional occurrence’ but was an inevitable result of the policy – reckless indebtedness – pursued for years with the help of the big international banks.

There is, of course, a reason for these decisions: the EU Court of Justice has become a political court whose task is to help implement the Commission’s policies.

It is not always even concealed. An example: the General Court in November 2012 [34] and the Court of Justice in February 2014 [35] decided to allow the ECB to suppress documents on the possible involvement of ECB officials in the falsification of financial statistics by the Greek authorities. The reasoning was that disclosure of the documents would have “undermined the protection of the public interest so far as concerns the economic policy of the European Union and Greece“. – The decision and the reasoning were political and in themselves proved some degree of involvement of ECB officials. Otherwise, disclosure could not have undermined the protection of the public interest of the EU.

Now the EU is setting up a recovery fund, known as the ‘Next Generation EU’: the EU Commission will borrow €750 billion and distribute €390 billion in grants and €360 billion in loans to member states, to be repaid by 2058.

The recovery fund can be justifiably defended under Article 122 of the Treaty. The pandemic can be considered a ‘natural disaster’ beyond the control of any individual member state.

But the recovery fund is based on joint debt, although the Treaties prohibit the EU from financing its activities through debt. This rule is circumvented by setting up the recovery fund and running its borrowing outside the EU budget.

In addition, the recovery fund will provide support for non-pandemic losses, as its name suggests. As worthwhile as such investments in the future are, they also mean that the EU is taking on joint debt for items not covered by Article 122.

The fund is rightly seen as a step-change in the EU’s integration path, even as important as the creation of the single market or the monetary union. [36]

EU institutions as each other’s protectors in case of Treaty violations

The EU Commission has now stepped in to protect the EU Court of Justice against criticism of its decisions. The Commission has launched infringement proceedings against Germany. This is due to the German Constitutional Court’s criticism of the Court of Justice’s favourable position on the ECB’s Public Sector Paper Purchase Programme (PSPP). The programme, which started in 2015, eased debt in Italy, among other countries, by reducing interest rates on Italian government bonds to levels below those in the US. [37]  The ECB’s rules and Article 123 of the Lisbon Treaty prohibit the ECB from supporting member states’ deficits.

The EU Commission’s concerns are understandable. The attempt to stop ‘illiberal’ developments in Poland and Hungary relies heavily on decisions of the EU courts. Accordingly, EU decision-makers want to reject any attempt to challenge the absolute jurisdiction of the courts in matters before them.

This is not unproblematic in a situation where the integration process that EU leaders want is being pursued by violating the EU Treaties, and these ‘interpretations’ need the blessing of the EU Court of Justice.

Finland’s largest newspaper summed up the problems in an editorial commenting on the creation of the new recovery fund:

“Supranational decision-making is expanding unnoticed into an area that was considered the domain of national decisions when the Treaties were made. Another dubious twist is that the EU Court of Justice, responsible for monitoring the legality of EU decisions, gains ever more political power as it interprets whether everything that has been done went right. If the EU Court sees nothing to point out, national courts have no way to challenge this.”  [38]

The Court of Justice, acting outside judicial control, defines its power limits itself by questionable interpretations with no legal basis. The parties from which it takes power away ’have no way to challenge this’.

The problem can only get worse as interpretations of the EU Treaties increasingly become a means of circumventing the law.

Said Päivi Leino-Sandberg, Professor of Transnational European Law at the University of Helsinki, referring to the Recovery Fund and its funding model:

“Circumvention of the Treaties undermines their credibility and the acceptability of operations of the institutions. The EU’s integration has been particularly notable for its strong reliance on the rule of law. What is left if the law is lost?” [39]

Events in the US in recent years show how dangerous challenging the legitimacy of state institutions can be. For example, a large part of the public does not consider the 2020 presidential elections legitimate, even though no evidence of breaches has been presented.

The EU authorities themselves are further undermining the legitimacy of the EU and its institutions by violating and circumventing even the most explicit articles of the Treaties. They are themselves providing material for anti-democratic demagogic forces and conspiracy theories, which is very dangerous.

The EU faces unresolved conflicts

No serious and responsible EU leader can deny that democracy is in crisis. At least in the EU and the US, the crisis is clearly visible.

Nor can any serious and responsible EU leader deny that the EU Treaties need reforming because they contain fundamental elements contrary to the rule of law and allow countries that are not rule-of-law states to be members of the EU.

Moreover: The Stability and Growth Pact has been repealed in practice. And many of the explicit articles of the Lisbon Treaty have been repeatedly violated so that they are also no longer valid in practice.

The legality deficit is not easy to repair

There is no simple solution to the EU’s legality deficit.

Many are calling for the EU to be democratised. That is a worthy demand in itself. But extending democracy, for example, through referendums or other forms of direct democracy, or increasing the power of the EU Parliament, will not solve the legality deficit. For example, no matter how democratically the Commissioners are elected, they are still not criminally liable for their official duties.

Neither would the legality deficit be solved by turning the EU into a ‘normal’ federal state with a government and legislation that formally meets the requirements of the rule of law. The old EU member states are established rule-of-law states, but that did not prevent them from accepting the EU’s legality deficit and the resulting Treaty violations.

Moreover, a majority of citizens in most if not all member states oppose the transformation of the EU into a federal state.

Even the dissolution of the EU would not solve the legality deficit. The crisis of democracy affects all democracies. National judicial authorities have not been able to prevent political leaders from adapting to the collective self-deception that has thus taken over the elite of Western Europe.

And how to process the illegalities of the past decades? Where can we find national or EU authorities that are not subject to a conflict of interest?

The EU needs to reform its Treaties

Repairing the EU’s legality deficit – in whatever form it takes – requires a reform of the Treaties.

The EU’s legitimacy cannot endure the contradiction between the letter of the Treaties and the reality of the EU indefinitely.

The EU has not been able to take such punitive action against the governments of Hungary and Poland that would have led them to change their stance conflicting with the rule of law. For example, the use of EU funds was linked to the rule of law in spring 2021, but Poland and Hungary managed to water down the agreement and postpone its implementation. Opposition NGOs in both Poland and Hungary called it a “capitulation”, saying the agreement was “almost toothless” and the rule of law mechanism was “sacrificed” to pass the budget. [40]

In the euro area – perhaps in the EU as a whole – there is a need for more solidarity and income transfers. Otherwise, at least Italy is at risk of leaving the euro, perhaps even the EU. Proposals for a eurozone finance minister, eurozone budget and taxing powers, income transfers between member states, etc., have been put forward for years. However, steps taken in that direction are increasingly difficult to interpret as compatible with the current Treaty. The parties that try to do so in the most economically successful member states will inevitably lose support to parties critical of or opposed to the EU. As a result, governing the member states will become increasingly difficult.

Any changes to the EU Treaties will be challenging to get through in the member states. If they require a constitutional procedure or a referendum, their passage is far from certain. Citizens may use referendums as a means of public protest. And in many cases, there are more than two options, yes or no. For example, in the Brexit referendum, Britain’s departure from the EU could mean many things on which a mere yes or no answer did not allow a position to be taken.

It is difficult to strengthen the review of legality in the EU without reinforcing the federal nature of the EU in one way or another. Steps towards federalism – even those taken to increase the rule of law – are unlikely to be supported by the majority of EU citizens in the current situation. For example, attempts to pass an ‘EU constitution’ failed in referendums in France and the Netherlands in spring 2005. [41]

EU citizens have a justified distrust of the centralisation of power in the EU. Any move in that direction is unlikely to win the support of the majority of citizens unless it is accompanied by a downward devolution of power in one way or another. [42]

About the EU conference on the future

EU leaders have clearly realised that the EU needs to be reformed and to do so, they need to take greater account of public opinion. The EU Conference on the Future [43], launched in spring 2021, can thus be seen as a self-critical gesture by EU decision-makers.

Unfortunately, we do not believe that the Conference will find a way forward, i.e. a solution to the EU’s legality deficit or the crisis of democracy in general. The division of the Conference into a number of very different themes is in itself a statement that there is no crisis of democracy or legality and that it is possible to reform the EU through individual improvements without asking what the fundamental problem is. The whole premise of the Conference is eclectic.

Besides, a year is a far too short time for a serious civil debate on a serious issue.

The EU has no way out of its legal crisis with its current means.

Our proposal for a solution to the EU crisis

The solution to the EU’s crisis of legality can only be the same as to the crisis of democracy in general.

A truth commission as a permanent state body

In the long term, we believe that every rule-of-law state needs a Truth and Reconciliation Commission as a permanent state body. Such a body is needed both in the EU and in every member state. Such a truth commission should work in cooperation with the Citizens’ Truth Forum.

The starting point for our proposal is that in democratic states governed by the rule of law, the greatest social injustices occur through collective self-deception, not through plain repression and that there is a continuing tendency at the top of society for this to happen.

”Truth Commissions and the Truth Forums deal primarily with injustices that have become, or are about to become, the norm. These injustices are always based on an official lie – a lie that is accepted, not only by politicians, but also by legal authorities, academic researchers, media, and, in the end, a large number of citizens, to their own advantage and often self-deceptively.” [44]

Our website lists various examples of collective self-deception, perhaps the most illustrative being Finlandization of the 1970s and 1980s.

But without pressure from enlightened public opinion, the EU and national decision-makers are unlikely to warm to such an idea because it would mean investigating and publicly acknowledging the wrongs and violations of the law committed by the EU elite.

However, that is the only way to save democracy. It is also the only way to ensure that even the profound reforms required can take place in a peaceful and controlled manner. The only way to restore the authority of politicians, officials, institutions, and experts is to publicly acknowledge the mistakes that have been made – in other words, to gradually make it a new ‘norm’.

The core problem: how to learn from history?

The core problem is how to create enlightened public opinion. The various practical proposals put forward in the New History Association’s programme are related to this. Those proposals form a whole with two sides:

(1) A reform of the educational system covering universities, various civic colleges and high schools, as well as traditional and social media.

(2) The decentralisation of ideological, political and economic power, starting with the creation of local banks under political control and the formation of a new type of basic human communities, both online and in real life.

The starting points are the following principles:

  • The problems of the world are common. The self-destruction of humanity is a real threat. A public debate on the fate of humanity must be open to all lawful opinions.
  • Humanity can only survive if it learns from its history. To learn from history, we need to study, debate and discuss recent history, the past era, and the entire 2.5 million year journey of the human species.
  • We must recognise the ideological nature of knowledge. Most social sciences, but also some empirical sciences, are ideological: interests – real or imagined, economic or socio-psychological – determine opinions; the less they are recognised, the more so. Therefore, objectivity can be pursued only by juxtaposing opposing views. Adhering to and enforcing the principles of fair debate is essential – it becomes the main subject of study and the main watershed between right and wrong.
  • One must get paid also for truthfulness, solidarity, and a sense of justice. This is both the core value of the emerging global society and a perspective for creating new ways of earning. Structural unemployment is a growing problem. No traditional legislative means can guarantee full employment. Structural change is painful, but it also creates a whole new set of opportunities: increased leisure time and opportunities for citizens to network globally and participate in decision-making. Citizens, not just decision-makers, are also facing challenges of ethical and intellectual renewal.

The Human Path Debating Encyclopedia (DE)

To put the above principles into practice, our main practical proposal is the idea of The Human Path Debating Encyclopedia (DE). It is a social media service suitable for use in educational institutions, the media, and Citizens’ Truth Forums. It is also a natural basis for real-life local sections.

The main features of the DE interface are described here. Its implementation requires not only web design and coding but also a competent editorial team and separate councils at different levels to oversee the debate culture.

By its very nature, the DE project should be managed by a democratically controlled governmental body. We believe that the EU would be the most appropriate.

By contributing to the launch and funding of the DE project, the EU would demonstrate in practice its will to reform by developing democracy. The EU would thus become a positive example for the rest of the world.

FEATURED IMAGE
Protest against corruption in Bucharest.

An anti-corruption rally in Bucharest, Romania in 2017. PHOTO: Mihai Petre, Wikimedia Commons.

REFERENCES

[1] Elina Kervinen, ”President Niinistö took a firm stance on the EU’s finances. ’The core principles have been diluted year by year.’” Helsingin Sanomat, Aug. 25, 2020 (in Finnish). 

[2] “Juncker proposes EU military headquarters”, BBC, Sep. 14, 2016.

[3]  ”Europeans show record support for the euro”, European Commission, Nov. 29, 2019.

[4] Susi Dennison & Jana Puglierin, “Crisis of confidence: How Europeans see their place in the world”,  European Council of Foreign Relations, Jun 9, 2021.

[5] Special Eurobarometer 500: Future of Europe, 2021.

[6] “’I would shoot’: Walesa Urges NATO To Show Strength To Russia”, RFE/RL, Jul. 1, 2016.

[7] Fukuyama: Expect More Violence Before America Returns to Sanity. Foreign policy, Jan. 18, 2021.

[8] Jérôme Monod, Pehr Gyllenhammar, Wisse Dekker, Reshaping Europe, ERT 1991, p. 11.

[15] Of course, corruption of judges and prosecutors is a much more serious matter than “conventional” corruption. Their illegal decisions are always a de facto usurpation of legislative power.

[16] 1998 Regular Report From The Commission On Romania’s Progress Towards Accession, November 1998, 12, ; 1998 Regular Report From The Commission On Bulgaria’s Progress Towards Accession, November 1998, 11.

[17] Our study on Estonia’s accession negotiations will also be published in English. The study has evidentiary value, as the accession negotiations were presumably conducted in much the same way for all candidate countries.

[18] Georgi Gotev, “Romania and Bulgaria were not ready for accession, EU auditors confess”, EurActiv.com, Sept. 13, 2016.

[19] Konstantin von Hammerstein, Mation Kraske, Alexander Szandar, ”How Fit Are Romania and Bulgaria for the EU?”, Der Spiegel, Apr. 18, 2005.

[20] Transparency International, Corruption Perception Index.

[21] “Romanian MPs back controversial bill that could end corruption cases”, Euronews, Apr. 25, 2019.

[22] Reporters Without Borders, World Press Freedom Index.

[23] Mariya Petkova, ”How Bulgaria hit rock bottom on press freedom”, Al Jazeera, Jun. 18, 2021.

[24] “EU East-West wage gap: huge and got bigger”, ETUC, Aug. 30, 2018.

[25] Simeon Djankov, ”Eastern Europe’s Lethargic Economies”, PIIE, Nov. 21, 2016.

[26] Louise Story, Landon Thomas Jr., Nelson D. Schwartz, ”Wall St. Helped to Mask Debt Fueling Europe’s Crisis”, The New York Times, Feb. 13, 2010.

[27] Paul de Grauwe, ”The politics of the Maastricht convergence criteria”, Vox, Apr 15, 2009.

[28] Paul de Grauwe, ”The politics of the Maastricht convergence criteria”, Vox, Apr 15, 2009.

[29] Unto Hämäläinen, ”Researcher assesses Finland’s euro decision: the elite took, the people whined”, Helsingin Sanomat, May 9, 2010 (in Finnish).

[30] Ashoka Mody, “Italy never should have joined the euro, and the ECB can’t rescue it from its next crisis”, MarketWatch, Jun. 12, 2018.

[31] Jörg Rocholl, Axel Stammer, “Where did the Greek Bailout Money go?” ESMT.

[32] Jeffrey R Banks et al., Economic Convergence in the Euro Area: Coming Together or Drifting Apart?, IMF Working Papers, Jan. 23, 2018.

[33] Decision of the Court of Justice of the EU, Nov. 27, 2012.

[34] Stephanie Bodoni, Elisa Martinuzzi, Gabi Thesing, “ECB Wins Ruling to Deny Access to Secret Greek Swap Files”, Bloomberg, Nov. 29, 2012.

[35] Stephanie Bodoni, Elisa Martinuzzi, “ECB Wins EU Court Ruling to Keep Swap Information Secret”, Bloomberg, Feb. 20, 2014.

[36] Nektaria Stamouli, David M. Herszenhorn, ”Greek, Spanish PMs see joint EU debt as precedent for more fiscal integration”, Politico, May 10, 2021.

[37] Dhara Ranasinghe, Saikat Chatterjee, Vikram Subhedar, ”Bubble-spotting in Europe”, Reuters, Sept. 12, 2017.

[38] ”In times of crisis, the EU encounters the limits of its power and expands its area by sliding”, Helsingin Sanomat, Jun. 16, 2020 (in Finnish).

[39] Päivi Leino-Sandberg, ”The Emperor’s New Clothes”, Perustuslakiblogi, Dec. 15, 2020.  (in Finnish).

[40] Martin Banks, “EU strikes Compromise agreement with Hungary and Poland over next long term budget“, The Parliament Magazine, Dec. 11, 2020.

[41] The decision-makers’ alienation from their voters is illustrated by the fact that 80% of Dutch MEPs supported the ‘constitution’, while 62% of those who voted in the referendum rejected it. David Elstein, ”How all-powerful institutions keep Europe in gridlock”, openDemocracy, Mar. 14, 2021.

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