Although the establishment of a federal regulator of major banks in the E.U. was as yet not approved by the European Parliament or ratified by the governments of states using the euro as well as any other states opting in, the European Council of Ministers signed off in December 2012 on an amendment that would give the European Central Bank authority over banks that have at least €30 billion in assets, make up more than 20% of their state’s economic output, or operate in at least two states (i.e., interstate banking). At the very least, three banks per state would come under the central bank’s oversight. Other banks would remain the responsibility of state regulators. This is an interesting “working out” of federalism, distinctively European-style.
For one thing, that the Council of state finance ministers—representing their respective governments—formulated the proposal while the representatives of E.U. citizens would then presumably have only an “up or down” say on the matter reflects the salience of the state governments at the E.U. level relative to the elected representatives of the people. That is, appointees of elected representatives at the state level have more power at the federal level than do the federal legislators who directly represent the people (i.e., without respect to state).
German Finance Minister Wolfgang Schäuble at the E.U. Council of Ministers discussing the bank supervisor amendment. WSJ
One implication of the imbalance of the “confederal” chamber based on international principles over the federal chamber based on national principles (i.e., representing citizens rather than states) is that the interests of the whole can be held up by the vested interests of a particular state government (e.g., Germany).
Another implication is that of a democracy deficit because the directly elected federal legislators are essentially in the back seat. To be sure, the state leaders who are driving the union are elected too, but to state office. Put another way, the legislators elected specifically to the E.U. level are playing second fiddle to officials elected to act in the interest of their particular state. This mismatch is a deficit in democratic terms.
Therefore, rather than focusing only on the substantive powers proposed for the ECB, attention might be given to the process by which the amendment to the E.U.’s basic law (i.e., constitutional) was formulated and sent through to be officially proposed and ratified. At a fundamental level, the states both designed and would ratify the proposal—a conflict of interest due to the relative subordination of the E.U. Commission and Parliament. It is as if the state legislatures would sit in judgment of what they themselves designed, effectively patting themselves on the back while the people’s federal representatives merely nod as though a footnote.
Source:
Gabriele Steinhauser and Laurence Norman, “EU Reaches Deal on Bank Supervisor,” The Wall Street Journal, December 13, 2012.
