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2. The EU: institutions , competence , decision making

2. The EU: institutions , competence , decision making. 2.1 Main features of the institutional set up 2.2 The principles of subsidiarity and proportionality and areas of Community competence 2.3 Methods of decision making.

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2. The EU: institutions , competence , decision making

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  1. 2. The EU: institutions, competence, decisionmaking 2.1 Main features of the institutional set up 2.2 The principles of subsidiarity and proportionality and areas of Communitycompetence 2.3 Methods of decisionmaking

  2. The institutionaltriangle The EuropeanCouncil The Council The ECB The Court of Justice, the Court of Auditors The Commission The EuropeanParliament

  3. The EuropeanCommission • Itstask is to articulate, represent and promote the common Europeaninterest • Ithas the solepower to initiatelegislation, itsproposals for legalactscannormallybechangedonlybyunanimity, and itcanwithdrawitsproposalifitsodecides • The Commissionmonitorsimplementation of Communitylegislation and policiesby nation states, it is the ”guardian of the treaties” • Eachmemberstatenominatesonecommissionar (sofar), buthe/sherepresentsnothis/her country but the common Europeaninterest • Decisions of the Commissionaretakenby a simplemajority in the college • Eachcommissionar is in charge of oneorseveralDirectorates, the EU bureaucracy • The Commission, a supranationalbody, is both a political and a technocraticbody

  4. The Council of Ministers of the European Union • Itactsunder the guidance of the EuropeanCouncil • Primarily a decision-makingbody, often in codecision with the EP (for legislation) • This is a forum for poolingsovereigntyof memberstates and for findingacceptablecompromizes to conflicting national interests • It is chairedby a rotatingpresidencywith responsibilities for organizingwork of the Council • The Councilmeets in differentcompositionsdepending on topic, for finance issuesit is EcofinCouncilthatmatters • Whiletypicallyworking on the basis of Commissionproposals and in codecision with the EP (for legislativeissues), the Council is the mostimportantdecisionmaker in the EU (except for or in additon to the EuropeanCouncil)

  5. The EuropeanParliament • It is the only EU institutiondirectlyelectedby EU citizens • A strangeparliament: Itcannotinitiatelegislation, only the Commissioncan; itcannotlegislate on itsown, only in codecision with the Council • Itcannotdecide on taxesorrevenues of the EU, onlymemberstatescandothis • Yet, the powers and influence of the EP haveincreasedover the years and itnowplays an importantrole in Communitylegislation and in deciding on the Communitybudget • The EP may, with a two-thirdsmajority, force the resignation of the Commission (as happened to the Santer Commission in 1999) • The EP is located and meets in Brussels, Strasbourg and Luxembourg! (but the realpower is arguablylocated in Berlin and Frankfurt)

  6. The EuropeanCouncil • Givesoverallpoliticalleadershipto the EU, setsitspriorities, givesimpetus for furtherwork, ensureshorizontalcoordination of the work of the variousCouncilformations, and reconcilesconflictualissues • Itconsists of the heads of stateorgovernment of the memberstates plus the president of the Commission • It is chairedby the President of the European Union • Meets (nowadays) frequently, meetsalsoseparately in the composition of euro areamemberstates • Takespoliticaldecisionsonly, legal and otherimplementation is for the otherbodies as well as for memberstates

  7. Other EU institutions • The European Central Bank (ECB): independentbodyresponsible for the monetarypolicy in the euro area, located in Frankfurt (seelater) • The Court of Justice: The legalauthority of the EU, located in Luxembburg • The Court of Auditors: monitors and evaluates the management of the Communitybudget, located in Luxemburg • The EuropeanInvestment Bank (EIB): financialinstitutiondesigned to facilitatefinancing of projects of common interest for the European Union, located in Luxemburg • Therearenumerousother EU institutions and agencies, oftenlocated in the memberstates (including in Finland)

  8. EU: areas of competenceand the principle of subsidiarity • The principle of subsidiarityimpliesthatdecisionshouldbetaken at the national (orlocal) levelunlessthere is a strong and specific case for Community action; the principle of proportionalitycomplementsthisbylimiting action so as not to gobeyondwhat is needed to achieve a specificobjective • Community action is thusjustifiedprimarilyifthere is someclear case of ”marketfailure” with cross-borderdimensions; otherwise the heterogeneity of preferences and the risk of politicalfailurecautionagainstCommunity action • There is a clear case for Community action (with QMV) to set up the internal single market and safeguard the fourfreedoms (to avoidfree-riding and national protectionism); there is a muchweaker case for Community action in areaslike social policyortaxation (and in manyareas of structuralpolicies) • The case for Community action in the field of monetary and fiscalpolicy is a matter of somedispute (cf.later) • NB that the Communitybudget is small, roughly 1 % of the area-wide GDP (and badlyspent)

  9. EU and memberstatecompetencein the area of economicpolicy (roughly) CompetenceMacroeconomicStructural policypolicy Memberfiscalpolicy (and labour market & statesmonetarypolicy social policy, outside the euro area) taxpolicy etc. Europeanmonetarypolicy in the internalmarket: Union the euro area, somecompetition, trade and fiscalpolicycoordinationstateaidpolicies

  10. Does the EU meetrequirements of democraticaccountability? • All EU memberstatesaredemocraticallygoverned at the national level (one of the Copenhagencriteria) • The EuropeanParliament is electedbyEuropeancitizen and the Commissioncanbeforced to resignby a 2/3 majority of the EP • All the members of the Council and the EuropeanCouncilareaccountabledomestically (butnotseparately for their EU policies) • The supranationalpower of the Commission (e.g. competition and stateaidpolicy) or the ECB (monetarypolicy in the euro area) arenot to beseen as undemocraticif/as the delegation of these (specific) powershavetakenplacebydemocraticmeans (through the treatiesagreedupon and ratifiedbymemberstates) • However, de facto the ECB is moreindependent (and furtherawayfromdemocraticaccountability) thananyothercentralbank, and givingfurtherpowers to the ECB in the area of financial supervision mayraisequestions • NB thatsmall and big stateshave the sameamount of votes in the governingcouncil of the ECB, thatsmallnationshavemoreinfluence in the Councilthantheirshare in the population of the EU, and thatcandidatesfromsmallnationsneedfewervotes to get into the EP (violating the ”one person onevote” principle) • Negotiations in Brusselsareoftentime-consuming and complex, with a keyrole for committees of civilservants, givingconsiderableinfluence and a strongrole to keyofficials in the ministries of memberstates • Also, agreementsreachedlate at night in the EuropeanCouncilor the Counciloccasionallyput the national parliaments in a situation of faitaccompli, creatingstrains for national democraticprocedures

  11. Rodrik’strilemma (adapted) National autonomy (fiscalpolicy) (presentconundrum) (as itused to be) Deep integration(EU/EMU) (PoliticalDemocracy union) NB: decisions on, e.g.,generalizedcofinancingriskunderminingdemocraticlegitimacy

  12. Issues of relevance for decisionmaking • Whoidentifies the problems? • How is preparatoryworkorganized? • Whosets the agenda of meetings of decision-makingbodies? • Whodefines the decisionalternatives? • How and bywhom is the debaterun and the decisionprocessorganized? • What is the requiredmajority for a decision? • How muchscope is there for ”horsetrading”? • How are the decisionsrecorded and communicated?

  13. Methods of decisionmaking: intergovernmental contra supranational • Intergovernmentalcooperation (IGC) as compared to supranational action (SNA): IGC SNA is voluntaryYes No is binding (sanctions) No Yes needscommon institutions No Yes is based on the unanimityprincipleYes No • Supranantional action cantake the form of delegationof powers(to a supranationalbody, such as the Commissionor the ECB) or the pooling of sovereignty(such as in the Council and in codecision) • Decisions in EMU are IGC or SNA, and aretakenby a supranationalbodyorbyunanimityorqualifiedmajority of memberstates of the euro area(depending on the case)

  14. The requiredmajority and efficiency costtotalcosts proceduralordecisioncosts externalcosts ½ m 1 majority (degree of) The higher the requiredmajority, the bigger the negotiationorproceduralcosts, and the smaller the externalcostsimposed on those in the minority. The costminimizingorefficientmajoritywilldepend on thesecosts, whichdifferdepending on the problem

  15. Characteristics of unanimousdecisionmaking • The risk of the tyranny of the majority is avoided (national sovereignty is respected) • Negotiations to findsolutionsbecomeverycumbersome and timeconsuming and encourage ”strategic” behaviour (bluffing) • Anybodycanuse the veto (”hostagetaking”) to protectitsinterests and to insist on privilegesorspecialconditions, sometimestotallyunrelated to the issue at hand (side payments, cf. The Italian milkquotas) • Itoftenturns out that no decision is possible, paralysis • The biggest nation may in practiceacquire a disproportionatepower as itpossesses the mostcrediblethreatpossibilities (the right of veto carrieslimitedweightif a big powercanbullysmallmemberstates)

  16. Characteristics of qualifiedmajorityvoting (QMV) • A minoritycouldbeexploitedby the majority (the ”tyranny of the majority”, cf. below) • No consistentpreferenceordermayemerge, the ambiguity of collectivechoice (cf. the votingparadox) • Maygive a lot of scope for ”horsetrading” (usefulorharmful) • The specifics of the decisionprocedurematter a greatdeal: sequentialversuscomprehensivedecisions, the specification of alternatives, the order of votingbetween alternatives, the scope for negotiations …

  17. Majorityvoting and the national interest T Sd c Q z b awe Q T N Therearetwosorts of countries: S and N, theirwelfarelevelsmeasuredvertically and horisontally. Original position is a. Intergovernmentalcooperationallowsanypoint on QQ betweenz and w (bothgain). Supranational action allowsanypoint on TT, alsothose to the left of dor to the right of e, that is, somecountriesmayloseifoutvoted in decisionsby a majorityuseingits position to exploit the minority NB: No weirdassumptionsareneeded for assumingthat the majoritymaywish to exploit the minority, rationality and nationalismmaybeenough

  18. The votingparadox (Condorcet) Assumethat the preferences of voters A, B and C over the alternatives x, y and z are as follows: A x > y > z B y > z > x C z > x > y The resultingmajoritydecisionviolates the transitivitycondition: x is preferred to y, y is preferred to z, yet z is preferred to x NB: The literaturetriggeredby the Arrow paradox: there is no way to aggregateindividualpreferencesso as to result in a majorityvotingproceduremeetingcertain ”reasonable” requirements (such as transitivity) NB: The attraction of majorityvoting (and democracy) is with the procedure, not with someinherentcharacteristics of the outcome

  19. Sequentialmajoritydecisions Assumethat the optimalpoints of threedecisionmakersaregivenby A, B,C: the closeronegets to the Y B preferredpoint the better (in bothdimensions X and Y). Start at point E; everybody A M agrees to go to F. Ifdecisions F on X,Y arevotedseparately, C the resultwillbe M (which E . illustrates the meanvoter X theorem).

  20. ”Nothing is agreeduntileverything is agreed” Assumeonedecision on both X and Y together with threealter- nativesa, b and c. A choice Y . Bbetweena and bgivesb (voted byB and C). Pitchingbagainstc a b givesc (byA and C), butthen a A. choicebetweena and bwould givea (instability of ranking). The c . C outcomemaybedeterminedby the onewhosets the agenda or X decides on the votingorder.

  21. The power of the agenda setter Assumenowthat the agenda- setterhas the power to specify Y . Bone option to bepitchedagainst b’ the status quo, assumed to be at a b the pointa. IfB is the agenda- A. .G setter, he couldget to a point likeb’ (with votes of B and A). A c . C neutral agenda setter (such as the Commission) couldengineer X a moreeven-handedsolution (such as at point G).

  22. Horsetrading Version X Version Y Project I II III I II III Voter A -6 -6 -12 -1 -1 -2 Voter B +2 -1 +1 +7 -1 +6 (payoffmatrix) Voter C -1 +2 +1 -1 +7 +6 Σ = -5 -5 -10 +5 +5 +10 NB: No majority for projects I and II (version X) but B and C couldagree on bothtogether (= project III) thoughthiswouldharmvoter A disproportionately (and A mightperhapsavoidthisbymaking side payments to B and/or C) NB: Ditto in version Y butnow the outcome is morefavourable in the aggregate (and A mightreceive a side payment). Horsetradingmaybeusefulorharmful, depending on the case (allowsdealing with preferenceintensity).

  23. Decisionmaking in the EU: conclusions and furtherconsiderations • Unanimityriskslocking in status quobut is inescapable for decisionswhere the scope for redistribution is considerable (like the EU budget) • The outcome of QMV-decisionscanbeheavilyinfluencedby the definition of the alternatives and the procedure (likevotingalternatives) • The rotatingpresidencygivesincentives for self-restraint for the presidency (there is scope for ”tit for tat” in repeatedgames) • The Commissioncansteer the process, notably in legalmatters (right of initiative and right to withdrawproposal) • The President of the EU (and of the eurogroup) aredesigned to assume the role of ”honestbroker”

  24. Questions • Whichare the main EU institutions? • Why is the Commissionfundamentallydifferentfrom the Council? • Why is the EuropeanParliament a strangeparliament? • Whereare the key EU decisionstakenphysically (location)? • Who is the president of the Commission, of the EU, of the ECB, of the Eurogroup, of the Council and who is the monetaryoreconomiccommissioner? • What is the essence of the principle of subsidiarity? • At whatlevel is the competence for monetarypolicy, fiscalpolicy, social policy, taxpolicy, competition and stateaidpolicy? • The EU is undemocratic: why? • What is the problem with unanimity in decisionmaking, and with lessthanunanimity • What is ”horsetrading”; is it badorgood?

  25. Part 2: Sort of summary • The EuropeanCouncil is at the top (has the bestlegitimacy in the eyes of the citizens) • The institutionaltriangel is key for Communitylegislation • Thereareconsiderabledifferencesbetweenintergovernmental and supranationaldecisionmaking; the former is common (also in the EU) but the latter is of keyimportance • Supranationaldecisionscome in twoforms: delegation of certainpowers to specificinstitutionsorpooling of soveregnty in the hands of the Council • The principles of subsidiarity and proportionalityare (shouldbe) overarchingguidelines • Communitycompetencevaries a lotbetweenvariousareas • The EU meetsrequirements of democraticaccountability – buttherearedilemmas • The specifics of the decisionprocessmatter a lot, there is a need for the Commission and the Presidency to act a ”honestbrokers”

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