European Elections Economic Crisis and the Democratic Deficit

Strategic Communications

February 20, 2014

Europe goes to the polls as the European economy slowly emerges from recession. The crisis has left a trail of social and economic detritus in its wake: limited growth for the coming years; high unemployment, in particular amongst the young; growing income inequality; a potential deflationary spiral; loss of public trust in government, and an even bigger resentment towards ‘Europe’. In this fifth edition of our series of snapshots on the forthcoming European elections, FTI Consulting looks at the impact the fallout from the crisis may have on the elections, the EP and the EU.

The slow recovery

The European economy and the euro zone seem to be finally on the road to recovery. There is reason to be cautiously optimistic, but optimism is muted by fears that the crisis will continue to affect the EU economy – and its politics – in the coming years. The economies of many EU Member States remain weak and the eurozone as a whole could soon experience deflation, a self-reinforcing phenomenon that cripples economies by making it harder for governments and borrowers to repay debts and disincentivising consumer spending.

Fears of a deflationary spiral are coupled with sustained high levels of unemployment – slowly decreasing but still at a significant 12%. Youth unemployment is a particular blot on the European copybook, which in the eurozone hit a record high of 24.4% in 2013. Rates in many countries are well above this: Spain’s stands at a staggering 57%.

These historic levels of youth unemployment will have a direct impact on the outcome of the European elections. As the Irish Minister of Finance Michael Noonan noted recently, youth unemployment “puts the wind beneath the wings of every extremist in Europe”. As discussed in an earlier snapshot, it is expected that the new European Parliament will see a drastic rise in the number of MEPs from extremist and eurosceptic parties, capturing up to 30% of the vote.

Fighting fires at the expense of democracy?

Some commentators argue that Europe’s response to the crisis has been as slow as the region’s recovery. A decision on how to reform the European banking sector has not yet been taken, and European officials have delayed and watered down plans to create a eurozone banking union, needed to recapitalise or shut down troubled financial institutions that have become a burden on strained economies.

On the other hand, the financial crisis has forced the EU to take creative emergency measures, many of which were adopted through complex systems. Unanimity on treaty changes was unrealistic and governments could not justify actions within existing treaty provisions. The response consisted then of a mix of intergovernmental measures and actions adopted within the EU framework. Consensus was reached to strengthen the Commission’s oversight of national budgets and find a way of pooling the Union’s resources to attenuate the growing divergences in borrowing costs for different countries.

But decisions taken by European Council members outside the framework of the European Union (EU) has led to debate about the democratic deficit in the area of economic governance. There has not been as much scrutiny as many MEPs would have liked, as Parliament has had only a minimal role in creating these new instruments. This has been exploited by Eurosceptic parties to demonise the EU in toto and blame all national austerity measures on it. Despite agreeing these deals in Council, Member State national governments have added fuel to the eurosceptic fire with that hoary old chestnut of blaming Brussels.

Criticisms of democratic accountability have surfaced in other areas of EU politics too. To address the alleged sluggishness of the legislative process, in recent years we have seen a dramatic increase in first-reading agreements – from 28% in the 1999-2004 legislature to around 80% in the current one1. These early agreements promote efficiency and reduce the length of time it takes the EU to finalise a legislative proposal (around 19 months). However these early agreements are controversial because they are negotiated before the EP adopts an official position in plenary and because they rely on deals struck in trilogues2 behind closed doors.

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