Why the European Commission is not the “unexpected winner” of the Euro Crisis: A Comment on Bauer and Becker

Abstract

The protracted euro area crisis has led to a resurgence of academic interest in integration theories. In a recent piece in this journal, Bauer and Becker argue that the euro crisis allowed the European Commission to strengthen its role in economic governance, in particular with regard to its implementation powers. Contrary to Bauer and Becker’s claim, I contend that the euro crisis has resulted not in strengthening the Commission. Rather, the Commission is undergoing “subtle disempowerment”, that is, a gradual transfer of decision-making authority and resources from the Commission to the intergovernmental level and to the European Central Bank. I illustrate the Commission's subtle disempowerment along three dimensions: the creation of the intergovernmental European Stability Mechanism; enhanced oversight mechanisms of the Commission via the troika constellation; and the creation of the European System of Financial Supervision, Banking Union and Single Supervisory Mechanism under the aegis of the European Central Bank.

Key words:

• European Commission
• European Central Bank
• Euro crisis
• theories of European integration

Recent years have seen a resurgence of academic interest in integration theories following the protracted euro area crisis and the politicization of the European integration process. To name a few examples, in addition to the single articles published on the topic (Bickerton, Hodson and Puetter 2014; Börzel and Risse 2009; De Wilde and Zürn 2011; Hooghe and Marks 2009; Schimmelfennig 2015a; Schmitter 2009), two special issues — ‘The EU in Crisis: Advancing the Debate’ (Tosun, Wetzel, and Zapryanova 2014) and ‘European Integration in Times of Crisis: Theoretical Perspectives’ (Iannou, Leblond and Niemann 2015) — were published in the Journal of European Integration and the Journal of European Public Policy, respectively. In contrast to the original contributions by Schimmelfennig (2014, 2015b) in these two special issues, Bauer and Becker’s piece (2014) seeks to move beyond the classical intergovernmentalism–supranationalism cleavage that has been at the centre of the integration theories debate over the last six decades.

Bauer and Becker’s main argument is that the euro crisis allowed the European Commission (hereafter, the Commission) to strengthen its role in economic governance, in particular with regard to its implementation powers. Using Börzel’s (2005) theoretical framework on the breadth and depth of integration, they find that the Commission was entrusted with more implementation tasks during the crisis, expanding the breadth (policy areas) and depth (competences) of its involvement in European economic governance. They argue that there was strong expansion in breadth in relation to financial stability support in the European Financial Stabilisation Mechanism (EFSM), the European Financial Stability Facility (EFSF), and the European Stability Mechanism (ESM); medium expansion in the breadth of economic policy surveillance in the framework of Six-Pack, Two-Pack, and the Fiscal Compact; and little expansion in the coordination of national policies in Europe 2020 and the Euro Plus Pact as well as supervision of the financial sector via the Single Supervision Mechanism and the Single Resolution Mechanism. As far as the depth of integration is concerned, there was strong expansion in economic policy surveillance and medium expansion in the coordination of national policies and financial stability support. Finally, there were no changes in depth in supervision of the financial sector (Bauer and Becker 2014, 225).

In mapping central changes in the implementation powers of the Commission in economic governance throughout the euro crisis, Bauer and Becker certainly provide an enlightening take on the changing power of this supranational institution. In addition, they make an important empirical contribution to two strands of literature. Firstly, they add to the literature on the implementation powers of the Commission (Hartlapp 2007; Laffan 1997), and secondly to the literature on the broadening power of the Commission on economic governance issues (Chang and Monar 2013; Franchino 2007).

While I agree with many of their observations about the Commission, some of their conclusions are ‘disputable’ (Bauer and Becker 2014), as they themselves admit. In this comment, I contend that the euro crisis has not strengthened the Commission, as Bauer and Becker claim. Rather, the Commission is undergoing ‘subtle disempowerment,’ that is, a gradual transfer of decision-making authority and resources from the Commission to the European Central Bank (ECB). The subtle disempowerment of the Commission has taken place along three dimensions: the creation of the intergovernmental ESM; enhanced oversight mechanisms of the Commission via the troika constellation; and the creation of the European System of Financial Supervision, Banking Union and the Single Supervisory Mechanism under the aegis of the ECB. In the case of the banking supervision, member states even opposed delegating new tasks to the Commission, preferring instead to widen the powers of the ECB. Admittedly, Bauer and Becker (2014, 224) allude to the fact that the financial supervision of the banking sector has strengthened the ECB. However, they do not develop this argument nor do they place the tasks delegated to the Commission in a comparative context with the powers delegated to other supranational institutions during the euro crisis.

My comments on Bauer and Becker address three broad categories: research design, theoretical contribution, and empirical findings. With regard to research design, the authors fail to define expansion and thus remain rather vague on how they measure ‘strong,’ ‘medium,’ and ‘little’ expansion in breadth and depth. These three categories are simply listed in a table without any indicators to distinguish between the various levels. What constitutes a ‘decrease,’ ‘increase,’ or ‘no change’ in competences in empowerment in different areas of economic governance? And compared to what? One way to address this issue would be to systematically map the competences of the Commission before and after the euro crisis and to compare them on this basis with the competences of other intergovernmental and supranational institutions before and after the crisis.

In terms of their theoretical contribution, Bauer and Becker fail to embed their findings in the EU institutional context. If we expand the reasoning of their paper to frame articles on European integration in terms of ‘who wins what, when and how,’ we cannot simply ignore the strengthening of intergovernmentalism as one central consequence of the crisis nor the empowerment of the ECB as a second one. The omission of other central actors is one of the main weaknesses of this piece, since it is difficult to give an accurate answer to the question of who the ‘unexpected winners’ of the euro crisis are if other European institutions are excluded from consideration. To successfully identify how the euro crisis shifted power from the intergovernmental to the supranational level and which institutions were empowered and which were not, for example, one needs at least to compare the empowerment of the Commission with the competences delegated to the newly created intergovernmental institution, the ESM, and the supranational ECB. A study that fails to account for the role(s) played by other European institutions can tell us little about the increasing power of a single organization in the aftermath of the euro crisis. This lacuna, in turn, leads to inaccurate conclusions about the question whether the Commission’s power has been strengthened or weakened as a result of recent changes in economic governance.

Turning to the empirical findings of their study, I find not empowerment but, rather, a subtle disempowerment of the Commission during the euro crisis. First, with the creation of the ESM, which integrated the temporary financial stabilization mechanisms EFSM and EFSF, the intergovernmental dimension was strengthened and the supranational Commission weakened. Contrary to the proposal of the President of the European Commission, Durão Barroso, member states did not create a European Monetary Fund. Instead they established the intergovernmental organization ESM, whose main function is to safeguard financial stability within the euro area and to provide financial assistance when necessary to euro area member states (see also European Stability Mechanism 2015). In contrast to Bauer and Becker, other scholars of European integration widely agree that the Fiscal Compact only empowers the Commission to a limited degree and even disempowers it in the case of the predominantly intergovernmental ESM (Bickerton et al. 2014; Fabbrini 2013; Schimmelfennig 2015a).

Second, the establishment of the troika weakened the Commission, as one of its central competences — overseeing implementation of economic and financial policies at the national level — is now shared with the International Monetary Fund (IMF) and the ECB. In the troika constellation, EU member states and the Commission draw upon IMF technical expertise in designing and implementing rescue packages and adjustment programs. There is no doubt that, together with the ECB and the IMF, the Commission negotiated memoranda of understanding with the countries under the bailout programs. However, in contrast to these two other organizations, which were only informally accountable to member states, the Commission was extensively scrutinized and kept responsive to member states by hierarchical supervisory mechanisms. For example, the Commission had to report regularly to the Economic and Financial Affairs Council and to the Eurogroup. This shows that, although the Commission was empowered in the field of economic policy surveillance, as Bauer and Becker (2014, 225) persuasively demonstrate, this empowerment went hand in hand with an expansion of the already extensive oversight mechanisms available to member states.

Finally, the extension of powers in relation to financial governance at the supranational level weakened the Commission and empowered the ECB. When it came to the establishment of the banking supervision, member states decided to delegate more powers to the ECB, but not to the Commission. In June 2013, the internal market commissioner Michael Barnier presented a report on the regulation of the EU banking sector, foreseeing a central regulatory and supervisory role for the Commission. This report suggested that the Commission was the best institution to supervise the banking sector, either under the lead of the Internal Market, Economic Affairs or Competition Directorate-Generals. The Commission considered that empowering the ECB to supervise banks was out of question due to possible conflicts of interest between the ECB’s responsibilities for regulating monetary policy and its commitment to ensuring financial stability. Likewise, the Council of Ministers and the European Parliament were not feasible candidates due to the long decision-making processes in each of these institutions and the need for speed and adaptability in banking regulation. As a result, the Commission saw itself as the only adequate institution to carry out these new tasks (Agence Europe 2013). This suggestion garnered major opposition from the German finance minister, Wolfgang Schäuble, who opposed transferring further competences to this supranational institution. Barnier simply countered that even if the Commission was not keen on assuming more competences in economic governance, there was simply no better alternative (Frankfurter Allgemeine Zeitung 2013). In the end, member states adopted Regulation 1024/2013, which delegated substantial powers for bank supervision not to the Commission but to the ECB. Thus, the newly created Banking Union, European System of Financial Supervision and the Single Supervisory Mechanism are now formally subordinate to the ECB. Moreover, not only is banking supervision now part of the ECB, but the European Systemic Risk Board, operational since 2011, is also chaired by the ECB president (see also Chang 2015). As these examples show, the ECB has been extensively empowered since the onset of the euro area crisis, leaving the Commission ‘the loser’ in banking and financial supervision.

To conclude, Bauer and Becker deserve credit for shedding light on the Commission’s changing role in European economic governance. However, designating the Commission the ‘unexpected winner’ of the euro area crisis is both misleading and inaccurate. If there is a ‘winner’ at all, then it is the ECB. To understand the extent of the institutional changes that have taken place since the beginning of the euro crisis, we need more systematic studies addressing the broader question of the conditions under which some supranational organizations are empowered and others disempowered. In addition, we need studies that concretely examine which of the Commission’s competences, beyond implementation powers, were strengthened during the euro crisis and which were weakened.

By taking account of agenda-setting, implementation, representation, re-delegation, evaluation, and monitoring competences and by showing how they shifted during the euro crisis, we will be better ‘forearmed’ to answer the general question: When, how, and why are supranational organizations (dis)empowered at critical junctures? (see also Conceição-Heldt 2016) At the same time, this will allow us to put the changes in the Commission’s role in economic governance into context and to elucidate how far have the intergovernmental and supranational dimensions of the European integration process developed in year six of the euro crisis.

Acknowledgments

This work was supported by the European Union’s Seventh Framework Programme for research, technological development and demonstration under grant agreement number 312368 DELPOWIO.

Disclosure statement

No potential conflict of interest was reported by the author.