Crisis governance

Question 1

Kreuder-Sonnen article on the anti-constitutional dimension of EU crisis governance

Answer 1

Although has yielded victories for both the intergovernmentalists (Schimmelfennig - the triumph of German preferences over Greece) and the neofunctionalists (fiscal surveillance as a step towards fiscal union), both schools of thought have grossly neglected legal infractions that have resulted from the botched and hasty responses of the EU in tackling the Eurozone crisis.

Question 2

Name some legal infringements that have occurred in the name of crisis governance

Answer 2

The European Stability Mechanism, which allows for member states to purchase the bonds of member states in crisis. In direct contravention of TFEU Article 125 (1).

The Commission’s reverse QMV procedure for Excessive Imbalance Procedures, which has created a mandate (non binding and not even legally binding) for crisis stricken member states to follow through with Commission recommendations (sort of relates to the RoLF in this aspect of Commission governance)

Troika conditionality programs, the OMT program (outright monetary transactions), part of ECB’s whatever it takes program, involved the direct purchase of sovereign debt from member states through secondary markets.

Question 3

The implications of anti-constitutionality?

Answer 3

Institutional landscape changes
Whether the EU’s legal normalcy has been permanently modified to reflect increasing tendencies towards policy by diktat
The inadequacies of current integration theory to explain these changes in the EU’s system of governance?
The EU’s slide into authoritarianism? policy by diktat?

Question 4

Collignon and Diessner on the effectiveness of ECB monetary dialogues to enhance financial market stability and the democratic legitimacy of the ECB as an institution

Answer 4

Conclusion: Has enhanced the democratic legitimacy of the ECB, although there is still much in the way of policy transparency to ensure stability in the markets

Question 5

How has ECB policymaking changed throughout the Eurozone crisis?

Answer 5

Initially to do with unemployment and inflation (a la Phillips Curve relationship). No longer the case following the eruption of the sovereign debt crises. New questions emerged, namely whether the bank’s role was to ensure financial stability or to target inflation.

New questions arose:
- How should the ECB deal with financial instability? Initially, the answer was austerity, but that only led to the exacerbation of the sovereign debt crisis.

• Should the ECB target bubbles before they burst, or target the clean-up effort after they burst? Targeting bubbles involves the painful process of debt deleveraging. Single supervisory mechanism and European systemic risk board have seen a new drive towards accountability.

Question 6

What are the two natural components of ECB policymaking when it comes to policy disclosure?

Answer 6

Transparency - the clarification of policy

Accountability - the justification and explanation of policy, a task sometimes fulfilled in the monetary dialogues

Question 7

What function, if any, have accountability measures served in the crisis years?

Answer 7

None really. According to Collignon and Diessner, monetary dialogues to explain policy actions failed to halt gradual rises in bond yields to reflect higher risk premia. Policy actions, however, did accomplish this effect, notably through OMT and the European Stability Mechanism, which flooded European markets with central bank liquidity.