Is European Federalization the beginning of a new era?

As we all know, the tower of the European Parliament building in Strasbourg was designed symbolically unfinished on one side, implying that the European project is a work in progress. During the past decade’s shattering events that took place in the european continent, such as the long-lasting economic crisis, the unpleasant Great Britain’s departure from the European Union, Poland’s and Hungary’s  attacks on the legal foundations of the bloc, the pandemic of Covid-19 and the tremendous war between Ukraine and Russian Federation, while Euroscepticism (the political position which encompasses both the outright rejection of european political and economic integration and the fierce opposition to remaining in the EU) has emerged and surged, there are those in contrast who claim that the nations of Europe can only safeguard their prosperity and social achievements by joining forces and standing together on all the key issues, stepping towards a federal union. Nevertheless, while some federation builders are far from mainstream, they might be the pioneers of a broader shift away from nationalism and towards more globalist and pan-European perspectives.

First of all, the movement of the European Federalization is an hypothetical scenario of the european integration that leads to a figuration of a sovereign superstate, like the United States of America. Federalism fulfills  two major functions, and especially a vertical separation of power by a division of responsibilities between two levels of government along with the integration of heterogeneous societies, while preserving their cultural and/or political autonomy. Moreover, although the EU, without the legitimate monopoly of coercive force, has acquired some fundamental federal principles and qualities, by no means should this international organisation be considered as a federal union, due to the fact that it has been developing since the very beginning of its establishment as mostly a supranational organisation along with some very significant intergovernmental elements. Particularly, it is equivalent that the main concept of the Costa v. ENEL judgement, a fundamental judgement of the Court of  EU in respect of principles, is the meaning of ‘transfer of sovereignty’ of member states contrary to the mere ‘delegation of powers’, which means that the countries have transfered some of their competences and sovereignty to the instruments of the EU, which have the duty to be adhered to the principles of conferral, subsidiarity and proportionality, according to Article 5 of the Treaty on the European Union. Two important features of a federation the EU lacks are first and foremost the fact that the member states remain the ‘masters’ of the treaties, as the Treaty on the European Union and the Treaty on Functioning of the European Union require consensus in order to be amended, and last but not least the EU’s inability of a real ‘tax and spend’ capacity (in other words there is no fiscal federalism). With that being said, in most policy areas, not only is Community law superior to national law, but alarmingly so it can deploy direct-effect giving citizens the right to litigate against their states for violating their rights conferred to them by Community law. In a parallel manner, it is of outmost importance the fact that the EU has the opportunity to sign Regulations, which are binding legislative acts applied across the Union, while alternatively it may propose Directives, which are legislative acts that set goals that EU countries are required to achieve, but grants individual countries the initiative on how these goals might be accomplished in reality. That is why at this moment the sovereignty still lies largely within the member states. Besides the existence of the unanimity rule in several fields such as the fiscal and social policies, the exclusive competence of the Council of EU in foreign affairs and defense, the de facto intergovernmental Commission and other elements call in question the existence of a true federation of the Union.

Furthermore, there have been some failed attempts to push the european integration closer to a federal, more centralized model with even more power in EU institutions. For instance, one such initiative was the drafting of a EU Constitution, which was adopted by the European Council on 18 June 2004, signed in Rome later that year in the presence of the European Parliament President, Josep Borrell Fontelles and approved by the European Parliament. However, this Treaty was rejected by France and the Netherlands during 2005 in their national referendums. Since it is not ratified by all 27 member states, it has no entry into force. On 4 June 2007, a group of high-level European politicians, known as the ‘Amato Group’, proposed to establish a new Inter-Governmental Conference, where they decided to write a new Treaty (the Reform Treaty/ Lisbon Treaty on 13 December 2007), which would rewrite the Maastricht Treaty, amend the Treaty of Rome and give the Charter of Fundamental Rights of the EU a legally binding status. It is also remarkable to refer that this new Treaty would be based on the first and fourth parts of the abandoned Constitution. This abortive federalist attempt insinuates that the two constitutional referendums were not the cause of Europe’s difficulties, but an indicator of the citizen’s dissatisfaction with a Europe that, after Maastricht, had come to standstill, since there remained no significant intermediate steps having been taken prior to the founding of a European federal state. In order to overcome this obstacle there was the need of alternatives that the people of Europe had before them. They could either re-start the process of European unification through the implementation of a courageous and far-sighted design or resign themselves to their continent’s inexorable decline. It was obvious back then that the federal core was not an idea that came out of nowhere. Many politicians leaders had expressed their conviction that the formation of a vanguard would be crucial if the process of European unification was to be put back on track. Nonetheless, these leaders did not have a full awareness of the need to establish a federal state and were conditioned by the intergovernmental cooperation approach.

When it comes to the Economic and Monetary Union (henceforth ‘EMY’), at its inception it was designed as an extreme system of fiscal governance where the units retained their fiscal policy, including in full the taxing power. However, the global financial crisis erupted in 2008 proved the institutional design of the EMY lacked effectiveness and credibility, due to the fact that with the crisis it became evident that markets did not consider that all Euro countries deserved comparable lending rates. As a result, the EU member states abandoned the strict policy of no-bailouts in order to maintain the stability of the single currencies. Apart from that, it is remarkable to mention the challenge to what extent a currency area and a single market are capable of resisting inequalities and structural imbalances between rich and poor regions and how to address them; either through effective economic coordination or through fiscal tools, like a central spending power, some kind of transfer mechanism or the use of taxation at a central level as an automatic equalisation system. Practically there are two possible models of fiscal integration that could be adopted by the EU on its way to federalization, and specifically the ‘surveillance model’ and  the ‘classic fiscal federalism model’. While with the first one the member states continue to preserve all taxing powers and the EU becomes a mere enforcer of discipline, in the second one the EU acquires its own sphere of fiscal authority and thus, its own fiscal tools for stabilization and the different fiscal functions are attributed to different levels of government as a result.

For the aforementioned reasons, the EU, which acts with all due respect to human dignity, freedom, democracy, equality, rule of law and human rights according to Article 2 of the Treaty on the European Union, is a work in progress. It brought peace and prosperity to a war-ravaged continent, but it is complicated to figure out what it will bring next. Although european federalization was a controversial issue couple years ago, it still remains ‘food for thought’, as there are yet those who are inclined to believe that it is up to federalists to promote the federal core strategy so that it will be to the forefront should Europe face another challenge that threatens to destabilize the global balance of power and fundamental principles of democracy itself.

Editor: Anetta Tselepi