36 - More union, more states

Summary

The EU has achieved a great union of the private economy, but little union of the public sector. The paradox is that European public finances are so scant that the EU has to intervene, control, and eventually bail out the public finances of its member states, a process that many regard as undemocratic. The EU is too interventionist because it is too weak. The alternative is for the Union to bolster public resources for large-scale initiatives, stop controlling and interfering in domestic policy-making, and return more fiscal autonomy to the member states.

We need to discontinue the idea of a “fiscal union” between member states and, instead, provide the European Commission with more fiscal resources. The fiscal autonomy of each of the levels of government, both the member states and the Union, as well as the local and regional governments, is the best formula for efficient public management and democratic accountability.

Comparing Europe and America

Some inspiration can be taken from the process of building the first modern union of states in a great continental area and inspired by democratic principles: the United States of America. The lengthy process of building the American Union, which was gradual, conflictive, and asymmetric, might be reminiscent of the process currently under way in the EU. It took close to 125 years from the initial undertaking to form the Union, the ratification of the US Constitution toward the end of the eighteenth century, to the point that the United States achieved solid federal institutions. From this standpoint, the EU, which has lasted to date around half this time, has made greater progress in many fields than the United States had halfway through its construction process. However, the EU's principal hurdle lies in its public finance sector.

At the very start of its existence, the US federal government was extremely weak, as weak as the EU is now in terms of financial resources. The majority of its expenditure, including that on the wars against the British, came from the individual states, which had proclaimed their sovereignty before accepting the US Constitution.