The Trilemma of European Economic and Monetary Integration, and Its Consequences

• Published date: 01 March 2016
• Date: 01 March 2016
• DOI: http://doi.org/10.1111/eulj.12165

The Trilemma of European Economic and

Monetary Integration, and Its Consequences

Jukka Snell*

Abstract: The article analyses trade-offs between sovereignty, mass politics and economic

and monetary union (EMU), employing Rodrik’s paradox of globalisation. The logic of

EMU is incompatible with sovereigntyand mass politics—only two of the three can coexist.

It is argued that three different answersto the trilemma can be observed in the EU practice.

In the initial EMU, integration was limited to safeguard mass politics and sovereignty.

Member States were free to seteconomic policies in response to domestic mass politics. This

proved unsustainable. During the crisis, democracy was sacrificed to bolster integration,

while sovereignty was maintained.Rules on fiscal discipline and macroeconomic imbalances

constrain mass politics, and non-democratic institutions have acquired more prominent

roles. Finally, long-termplans for a genuine EMU envisage the strengthening of integration

and moving the locus of democracy to the EU level, while weakening sovereignty. The

analysis carries implications. If national courts insist on sovereignty and democracy, the

likely consequence is an unworkable EMU, damaging the output legitimacy of the EU.

The model adopted in the crisis reinforcesthe elite nature of the EU, undermines democracy

at the national level and may bolster politicalextremism. This leaves the task of building the

preconditions for democracy at the European level.

Introduction

The euro crisis and the response to it can be and have been analysed from many differ-

ent angles.

1

One perspective is substantive. What are the legal changes that have taken

place? How does the current legal framework differ from the original ‘constitution’of

the economic and monetary union (EMU)? Another perspective is institutional. How

have the roles of, and the interplay between, the various European institutions changed

as a result of and in response to the euro crisis? Is a new form of intergovernmentalism

being established? If so, how does this account for the strengthened role of the Commis-

sion and the European Central Bank (ECB)? Yet another perspective is constitutional.

How has the relationship between the EU and its Member States, in particular those

that have adopted the euro, been altered? What kind of powers have and can be trans-

ferred from one level to another?

* Professor of European Law, University of Turku and Swansea University. Earlier versions of this article

have been presented in Amsterdam, Cyprus, Leiden and Turku in the course of 2014 and 2015. I am

grateful for the comments of Agustín José Menéndez and two anonymous referees.

1

The most comprehensive legal analysis to date are A. Hinarejos, The Euro Area Crisis in Constitutional

Perspective (Oxford University Press, 2015), and K. Tuori, The Eurozone Crisis: A Constitutional Analysis

(Cambridge University Press, 2014).

European Law Journal, Vol. 22, No. 2, March 2016, pp. 157–179.

© 2016 John Wiley & Sons Ltd., 9600 Garsington Road, Oxford, OX4 2DQ, UK

and 350 Main Street, Malden, MA 02148, USA

The present article seeks to combine several of these perspectives. It does so by exam-

ining and applying Dani Rodrik’s‘trilemma of globalisation’to the context of the

European EMU.

2

My central claim is that Rodrik’s trilemma also applies to European economic and

monetary integration: you cannot have at the same time a well-functioning EMU, mass

politics and nation states. It is further argued that, in the early years of monetary integra-

tion, the EU opted for a model where mass politics and nation states were preserved, but

at the expense of the coherence of the design of EMU. I call this the ‘early EMU’. During

the euro crisis, the EMU model changed. In order to ensure the functioning and even the

survival of EMU, the substance of mass politics was reduced, while the role of the nation

states was maintained. I call this the ‘crisis EMU’. Finally, an alternative has been put

forward, most notably in the Commission’s blueprint for a deep and genuine EMU.

3

In its proposals, the Commission puts forward a plan for the strengthening of mass pol-

itics at the European level, at the expense of nation states. I call this the ‘blueprint EMU’.

If the analysis offered is correct, it has profound implications.

4

If we remain commit-

ted to EMU, we must recognise the trade-off between maintaining mass politics and

maintaining nation states. The defence of the latter, for example by national constitu-

tional courts and national elites, will come at the cost of disempowering citizens. There

is a danger that this will render various forms of extremism more appealing and even

rational as a revolt against mass politics that has been robbed of its substance and as

an attempt to create a radical change in or overthrow the system. However, if we choose

instead to focus on defending national sovereignty and domestic democracy,

5

we may

be saddled with a poorly functioning currency union that will sap the output legitimacy

of the whole European project that runs the risk of being associated with misery,

rather than with prosperity.

Dani Rodrik’s Trilemma

Dani Rodrik has put forward the notion of the ‘trilemma of globalisation’in a number

of places.

6

The basic idea is simple: you cannot have at the same time deep international

economic integration, nation states and mass politics. Only two of the three can coexist.

2

D. Rodrik, ‘How Far Will International Economic Integration Go?’(2000) 14 Journal of Economic Perspec-

tives 177–186. For an earlier attempt from a political science perspective, see B. Crum, ‘Saving the Euro at

the Cost of Democracy’(2013) 51 Journal of Common Market Studies 614–630. See Rodrik’s recent views in

‘Future of European Democracy’at https://www.sss.ias.edu/files/pdfs/Rodrik/Commentary/Future-of-

Democracy-in-Europe.pdf.

3

Commission Communication, ‘A Blueprint for a Deep and Genuine Economic and Monetary Union:

Launching European Debate’(2012) COM 777 final/2, available at http://ec.europa.eu/archives/commis-

sion_2010-2014/president/news/archives/2012/11/pdf/blueprint_en.pdf.

4

The fundamental significance of the crisis for European integration more broadly has also been emphasised,

for example in the reports for the XXVI FIDE Congress; see F. Amtenbrink, ‘General Report’at 75 and

J.-P. Keppenne, ‘Institutional Report’at 179, both in U. Neergaard, C. Jacqueson, and J.-H. Danielsen

(eds), The Economic and Monetary Union: Constitutional and Institutional Aspects of the Economic Gover-

nance within the EU (DJØF Publishing, 2014).

5

See P. Leino and J. Salminen, ‘Should the Economic and Monetary Union Be Democratic after All? Some

Reflections on the Current Crisis’(2013) 14 German Law Journal 844–868, for an analysis of the crisis from

a democratic perspective.

6

Above, n. 2, and D. Rodrik, The Globalization Paradox: Why Global Markets, States, and Democracy Can’t

Coexist (Oxford University Press, 2011).

The Trilemma of Economic and Monetary IntegrationMarch 2016

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