Academic journal article IUP Journal of International Relations

European Monetary Union's Single Banking Supervision Mechanism: Another Brick in the Wall? [Dagger]

Academic journal article IUP Journal of International Relations

European Monetary Union's Single Banking Supervision Mechanism: Another Brick in the Wall? [Dagger]

Article excerpt

Introduction

Free movement of capital is one of the four basic freedoms envisioned by the Rome Treaty (1957).1 Nevertheless, its development was the slowest of the four and is still in process.

Aimed at enhancing free movement of capital, banking supervision at the EMU relied, for many years, on homeland supervision. It was compatible with the general EU spirit at that time, favoring coordination, cooperation and minimum harmonization of the markets over enhanced integration.2 Following the financial crisis, a Single Supervision Mechanism (SSM) replaced it.

Against the growing criticism regarding the non-democratic nature of EU regime, including the mechanisms devised to pull out of the financial crisis, the Brexit marking a new peak of this frustration, this paper assesses whether the SSM and the decision-making process leading to it enhance the democratic or the non-democratic aspects of EU/EMU regime. After shortly discussing the link between the financial crisis and the 'democratic deficit', it analyzes the democratic and non-democratic aspects of the decision-making process that led to the SSM establishment. It then examines the democratic and non-democratic elements of the SSM, in the context. The conclusion follows.

The Democratic Deficit and the Financial Crisis

Democracy is a declared core value shared by EU people(s). No consensus exists on how to define democracy. Current regimes considered 'democratic' may have, in fact, mixed democratic, oligarchic, and monarchic elements. However, democracy is perceived as a social contract formed by all eligible citizens.3 Legal equality, political freedom, rule of law and a political system for choosing and replacing the government through free and fair elections have been identified as important democratic characteristics,4 as well as majority rule with due protection of minority rights and the capacity of all voters to participate freely and fully in the life of their society.5

EU Treaties (Article 3(1) TEU, Article 9 TFEU) provide that democracy underlines EU regime. Euro-fans realize that EU's supranational structure implies an adapted perception of democracy, compared to national regimes.6 Euro-skeptics refer to democracy as a right not to be ruled by the EU.7

The several measures EU/EMU took to pull vulnerable member states out of the financial crisis reinforced a tension between symbolic legitimation, based on the principle of democratic representation and participation, and legitimation based on policy effectiveness.8 Hesitation as to how to reconcile democracy with a market-oriented financial order swings between the fear that favoring market interests may be harming democracy, reinforcing the 'democratic deficit', and the fear that democratic decision making may risk the financial stability of the Eurozone, or of the EU in general. Many EU citizens, holding the former view, experience growing frustration and a sense of detachment from the EU or the EMU,9 whereas EU decision makers, holding the latter view, take 'technical' steps, subjecting long-term economic and financial stabilization to further market integration.

The Five Presidents' Report10 explicitly envisions turning the Eurozone into a full economic, financial, and fiscal union at the latest by 2025, followed by a political union. If this plan is completed, it would pragmatically bring the Eurozone (or maybe the EU) closer than ever to a federation,11 a result doubtfully acceptable by most EU/Eurozone population,12 judging upon the recent Brexit and the reactions to it in many member states.

The growing 'democratic deficit' feeling shared by many EU citizens encompasses three main aspects of the supranational decision-making process: Who decides? The allocation of ruling power and representation arrangements in the EU/EMU;13 How decisions are made-to what extent the opinion of the European 'people(s)' is taken into account; and the essence: What is, or should be, decided? …

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