Unravelling the European Community of Debt

• Date: 01 November 2016
• Author: Sabine Frerichs
• Published date: 01 November 2016
• DOI: http://doi.org/10.1111/eulj.12224

Unravelling the European Community of

Debt

Sabine Frerichs*

I Introduction

Europe is built on debt. Cre dit and debt integrate so cieties, both within and ac ross

national borders. Debt relations are constitutive of the European polity, and critical for

its success or failure.

1

In this sense, the Europea n Union has long been not only a

‘community of fate’and a ‘comm unity of law’, but also a ‘community of debt’,inwhich

manifold bonds connect states and peo ples. Solidarity between Member States as w ell

as their citizenries has been one of the major inspirations of the European project. The

recent financial crisis has put this solidarity to the test, raising difficult questions about

who owes what to w hom in today’sEurope.

The aim of this specialissue is to unravel the European community of debtby retracing

the processes through wh ich debt and solidarity have b ecome transnationalis ed and

Europeanised.

2

Putting European law in its context, which is the mission of this journal,

3

we seek to illuminate legal, economic, political, historical and cultural aspects of existing

networks of debt and solidarity, which havebrought Member States, market participants

and Europeancitizens closer to each otherbut also increased the potentialfor conflicts and

crises. In turn, the Eurozone crisis offers an en try point into studying the multifaceted

bonds of obligation, which condition and shape the European polity, and whose nature

and extent has now become a matter of co ntestation. This special issu e thus also

contributes tocontextualising the ongoing crisisand exploring its normative implications,

* Professorof Economic Sociology, Vienna Universityof Economics and Business,Austria.

1

K. Dyson, States, Debt, and Power: ‘Sa ints’and ‘Sinners’in European Histo ry and Integration (Oxford

University Press, 2014). While Dyson’s bookfocuses on public debt, it also makes clear that the prevalence

of public debt,understood as sovereign debt(in the narrow sense) or as the balanceof liabilities and assets of

the publicsector (in the broadersense), is affected,and may eventually bedriven, by the financialcommitments

of the privatesector, includingcorporations as well ashouseholds, within thedomestic context as wellas in the

cross-bordercontext of capital mobilityand financial integration;see ibid.,at50–52.

2

This special issue draws on contributions to the Special Issue Workshop of the European Law Journal

‘Community of Debt? The Transnationalisation of Debt and Soli darity in Europe’, which was held at the

European UniversityInstitute (EUI), Florence, 19–20 November 2015. We gratefullyacknowledge financial

support by Wiley-Blackwellin preparing this special issue and exceptional commitment by the editorof this

journalto make it as informative andinspiring as possible.The workshop was organisedby the research project

‘European Bonds: The Moral Economy of Debt’(2013–17), which receives funding from the Academy of

Finland and the Universityof Helsinki. It was hosted by the European Research Council project ‘European

Regulatory Private Law’(2011–15 ) at the EUI, which was funded under the European Union’sSeventh

Framework Programme (FP/2007–20 13)/ERC Grant Agreement n [269722], and al so supported by the

Finnish Academy project ‘The Many Con stitutions of Europe’(2010–15) . We would like to thank all

contributors,commentators, and chairs for theirvaluable inputs to this workshop and forengaging in a very

productive interdisciplinary discussion. Specialthanks go to Agustín Menéndez, Hans Micklitz and Kaarlo

Tuori.

3

F. Snyder, ‘Editorial’, (1995)1 European Law J ournal,1–4.

European La w Journal, Vol. 22, No. 6 , November 2016, pp. 7 20–742.

© 2017 John Wiley & SonsLtd. 9600 Garsington Road, Oxford,OX4 2DQ, UK

and 350 Main Street, Malden,MA 02148, USA

which has been a particul ar interest of this journal.

4

To get a grasp of the overall

constitution of the European community of debt, we will start from its key constituents:

(1) integrated capital markets,

5

(2) interdependent welfare states,

6

and (3) the reformed

monetary union.

7

The proliferationof transnational debt relationswithin and beyond Europe is the result

of processes of financial andmonetary integration by means of law and governance. The

major turning point in this proc ess was the liberalisation of capit al movements, which

complemented the free movem ent of goods and services, labo ur and enterprise, and

changed theconditions for coordinationof monetary policies at the Europeanlevel. It thus

had an effect on both ‘layers’of the European economic consti tution.

8

While the

microeconomic constitution of the internal market came to spur the transnationalisation

of private debt, the macr oeconomic constitutio n was set for monetary union , which

furthered the transnationalisation of public debt.

At the same time, national welfare regimes became increasingly interlinked, although

less so by way of building a ‘Europeanwelfare state’through EU level socialpolicies than

through developments both in the micro- and macroeconomic constitution.

9

Whereas the

free movement of capitaland establishment affects the capacity of Member States to raise

taxes (tax base mobility), the right to free movement for workers and persons is

increasingly being discussed in its effects on public spending (welfare migration). At the

same time, Member State budgets are restricted by the requirements of monetary union,

4

See, for example, I. Bantekas andV. Renaud, ‘On the Odiousness of Greek Debt’, (2016) 22 European Law

Journal, 539–565; D. Adamski, ‘Economic Policy Co ordination as a Game Involving Economic Stability

and National Sovereignty’, (2016) 22 EuropeanLaw Journal,180–203; U. Šadl and M.R. Madsen, ‘Did the

Financial Crisis ChangeEuropean Citizenship Law? An Analysis of Citizenship Rights AdjudicationBefore

andAfter the Financial Crisis’,(2016)22EuropeanLaw Journal,40–60; A. Johnston,‘R egulating Hedge Fun ds

for Systemic Stability: The EU’sApproach’, (2015) 21 European Law Journal,758–786; N. Dorn, ‘Legal

“Elasticity”and “Sidestepping”in EuropeanCrisis Management of Financial Markets’,(2015)21European

Law Journal,787–802; F.W. Scharpf, ‘After the Crash: A Perspective on MultilevelEuropean Democracy’,

(2015) 21 European Law Journal, 384–405; M.A. Wilkinson, ‘Authoritarian Liberalism in the European

Constitutional Imagination: Second Time as Farce?’, (2015) 21 European Law Journal,313–339; A. Somek,

‘Delegation and Authority: Authoritarian Liberalism Today’,(2015)21Europe an Law Journal,340–360;

D. Wilsher, ‘Law and the Financial Cris is: Searching for Europe’s New Gold St andard’, (2014) 20

European Law Journal, 241–283; A.J. Men éndez, ‘Editorial: A European Unio n in Constitutional

Mutation?’, (2014) 20 European Law Journal,127–141; C. Offe, ‘Europe Entrapped’,(2013)19European

Law Journal, 595–611; N. Scicluna, ‘EU Constitutionalism in Flux: Is the Eurozone Crisis Precipitating

Centralisation or Diffusion?’,(2012)18European Law J ournal,489–503; R. Colliat, ‘A Critical Genealogy

of European Macroeconomic Governanc e’, (2012) 18 European Law Journal,6–23; S. Pagliari, ‘Who

Governs Finance? The Shifting Public–Private Divide in the Regulation of Derivatives, Rating Agencies

and Hedge Funds’, (2012) 18 European Law Journal,44–61; P.D. Amri and B.M. Kocher, ‘The Political

Economy of Financial Sector Sup ervision and Banking Crises: A Cros s-Country Analysis’, (2012) 18

European Law Journal,24–43; and M. Ojo, ‘The Changing Rol e of Central Banks and the Role of

Competition in Financial Regulation during (and in the Aftermath of) the Financial Crisis’, (2011) 17

European Law Journal,513–533.

5

J. Snell, ‘Free Movement of Capital: Evolutionas a Non-Linear Process’, in P. Craigand G. de Búrca (eds.),

The Evolutionof EU Law, 2nd edn (Oxford UniversityPress, 2011), 547–574.

6

Cf. D.M. Trubekand L.G. Trubek, ‘Hard andSoft Law in the Constructionof Social Europe:The Role of the

Open Method of Co-ordination’,(2005) 11 European Law Journal,343–364, at 345–346.

7

Cf. F. Scharpf, ‘Monetary Union, FiscalCrisis and the Preemption of Democracy’,(2011)MPIfG Discussion

Paper 11/11,available at: http://www.mpifg.de/pu/mpifg_dp/dp11-11.pdf, at 34.

8

For the distinction between micro-and macroeconomic layersof the European economic constitution, see K.

Tuori and K. Tuori, The Eurozone Crisis:A Constitutional Analysis(Cambridge UniversityPress, 2014).

9

C. Hayand D. Wincott, The PoliticalEconomy of EuropeanWelfare Capitalism(Palgrave Macmillan,2012), at

132–133.

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