Europe has come to praise democracy and is about to bury it. The Greek crisis, caused by the uncooperative behaviour of different nation states, has been a wake-up call showing that monetary union without an economic government will not work in the long run. Reforms are needed. Yet, because they widen the democratic deficit, the few proposals presently on the table are likely to worsen Europe’s crisis over time.

Greece has proven one fact: the intergovernmental method of governing the single currency is doomed, because individual member states will always pursue partial interests, and never the collective interests of all citizens. This makes it impossible to implement policies that are optimal for the welfare of European citizens. By definition, national governments represent national constituencies, but the effects of their actions have consequences for citizens all over the Euro Area. Because national governments seek to rally support for a bundle of policies that mixes national and European issues, they cannot speak or decide for all Europeans together; and the decisions made by one government are inevitably an imposition on those who could not vote for them in a different member state. Intergovernmental policy agreements are not agreements between citizens.

Thus, the excessive deficits of the Karamanlis government have weakened the euro for all Europeans, but non-Greek Europeans were not able to democratically control that government. The Greek opposition, which is now striking against the austerity plan, asks why they should suffer to meet conditions imposed by Germany, and in Germany a chauvinist majority refuses to pay for Greek irresponsibility.

The intergovernmental system has two consequences: first, it prevents efficient policy solutions, because member state governments block each other; the system therefore contributes to the deterioration of ‘output legitimacy’ and a general disenchantment with Europe. Second, it prevents European citizens from articulating their preferences for policies that affect them all. There is no debate about what policies should be pursued, because citizens cannot charge a European government with the defence of their European interests, as distinct from national ones. The problem is not that Europe is lacking a public sphere, where issues of common concern could be discussed, but rather that European citizens are lacking the power to make policy choices, which they would need to discuss. As a consequence, a sense of frustration and the perception of Europe’s un-democratic character are becoming increasingly stronger in Europe. Both these tendencies could ultimately destroy the European Union.

Recognising the inefficiency of the Euro Area’s macroeconomic governance, French governments have frequently called for a gouvernement économique, without ever specifying what this meant. German governments used to resist these demands out of fear that it could threaten the independence of the European Central Bank. After the disaster of Germany’s handling of the Greek crisis, Chancellor Angela Merkel has now rallied President Nicolas Sarkozy, although she immediately clarified: ‘The economic government is us, the 27 member states’. One is reminded of Louis XIV: ‘L’Etat, c’est moi!’. Thus, the Merkel-Sarkozy approach to economic government is a pre-democratic, absolutist model. It is unlikely to produce results because intergovernmental cooperation does not work. Nor will a Diktat by the directoire of the big member states make Europe more acceptable to its citizens.

Recalling that its task is to ensure the proper functioning and development of the common market, the European Commission has proposed tighter surveillance of member states to ensure that they stick to their obligations under the Stability and Growth Pact. National budgets are to be coordinated during a ‘European Semester’; governments that violate the rules are to be punished; and the Commission is to be authorised to ring alarm bells early on. All member states must decide budget rules, similar to Germany’s new constitutional Schuldenbremse. These proposals seek greater consistency between member states’ fiscal policies and the unified monetary policy. However, they do not address the fundamental problem behind the diverging national policies, namely the issue of democratic legitimacy.

Modern democracies are built on the principle: ‘No taxation without representation’. A government is only to act within the scope of what citizens have authorised it to do. Clearly, a European economic government must act in the interest of European citizens, who are the owners of the euro and who are affected by policy decisions that impact inflation, interest rates, the exchange rate, etc. It would be logical that the Commission is charged to administer these common European public goods, but only, if citizens have the right to control it through their elected representatives in the European Parliament. National governments cannot carry this legitimacy because they are not elected by all European citizens, but only by national factions that cannot represent the collective interest of Europeans.

Hence, even if the Commission plans could improve output legitimacy for European institutions by centralising competences, it will widen the democratic deficit and thereby undermine the consensus for the European integration project. Under such a system, it is impossible to implement policies in the interest of all. An unelected European Commission, and even worse, an independent Fiscal Policy Council of unelected experts as proposed by the European Central Bank, cannot command the legitimacy, which is required to govern people’s money. President Chirac famously said about Commission President Prodi, who had requested the reduction of the structural deficit caused by Chirac’s tax reforms: ‘Does he not know that he is only a high-ranking civil servant’.

The conclusion must be to set up a European government, which will design a coherent set of policies and at the same time give citizens the right to decide what this government should do. For Europe’s left, it means to fight the undemocratic reforms proposed by Merkel/Sarkozy and the Barroso Commission. In Europe, we now need to ‘dare more democracy’, to take up the famous sentence by Willy Brandt.