Mr. David Kitching:

I thank the Chairman for the invitation to come and speak here. While I represent the Foundation for European Progressive Studies I happen to be an Irish citizen too. As a result I take this meeting very seriously and hope that I can offer a perspective that might be of some use to the committee. I will begin by addressing matters of economic, budgetary and fiscal co-ordination, followed by the political angle. If it is acceptable to the committee, I will save the commentary on the situation of the United Kingdom until the discussion afterwards.

It is interesting that the committee’s invitation made direct reference to the European semester process, a cycle of economic and fiscal policy co-ordination in existence since 2010. The objective is to ensure sound finances, foster growth and prevent macro-economic imbalances. Even this process raises issues about legitimacy and accountability in terms of the lines that can be crossed by partners in areas such as surveillance and other kinds of intervention. Indeed, many proposals for budgetary co-ordination cite the potential for central authorities to veto certain national legislation. This is often linked to the restrictive rule that national deficits should not exceed 3% of GDP. Adherence would be maintained through a mix of financial sanctions, default mechanisms and debt mutualisation as a carrot. When it comes to the use of mechanisms such as eurobonds, national governments need to decide the level of control they are willing to cede in the interests of efficiency. The economic structures of the European Union are affected by sensitive political questions regarding the most legitimate level of co-ordination for each type of legislation. As one would expect, there are radically different perspectives on where these lines should be drawn.

Decision-making on economic, budgetary and fiscal co-ordination requires the appropriate institutional mechanisms. At present, the ECB is very limited in its capacity to improve things due to its focus predominantly on monetary stability. Monetary targets focus on inflation but the ECB needs real targets, with a focus on economic and social outcomes such as tackling unemployment. A more active ECB with the ability to issue bonds to cover state debt could be a huge help in this regard. Monetary stability is vitally important but it should be accompanied by a more ambitious strategy for full employment and increase in demand. To achieve this, the ECB and the EU require significant structural and institutional changes in the long term. In particular, it is time to make the ECB politically accountable, thereby removing its independent status. The European Investment Bank is another facility whose lending scope could be widened. It has great potential to increase employment and demand through project bonds and targeted investment. Many of the proposals for a stronger political union require a larger EU budget and even the potential for the creation of a supranational finance ministry. Once again, the corresponding loss of fiscal control at national level might be a bridge too far in many member states.

In Ireland, it is necessary for us to develop a coherent perspective on our institutional preferences in the European Union. I understand the considerable effort that went into the referendum campaign on the fiscal compact treaty and the political pressure to pass it. At the time FEPS research indicated that the treaty could prove damaging in the long term because it narrowly constrains the capacity of national governments to use fiscal policy as a counter-cyclical mechanism at times of crisis. When we need to boost public investment we may not have the necessary tools in future crises.

I will turn now to political integration. Suggestions for integration initiatives abound in Brussels. The most noticeable proposal of recent years, in media terms at least, has been the introduction of a directly-elected President of the European Commission. Of course, the secrecy in which the president is chosen must end. At the moment it is more akin to a papal conclave than an electoral process. On a continent dominated by parliamentary democracy, a US style presidential election seems slightly incongruous. A more realistic option could be indirect elections through the process of the European Parliament elections. In this sense, in next year’s European Parliament elections, following a proposal from the Party of European Socialists in 2009, the main European political parties have agreed to select top candidates or their preferred option as the Commission president and they will campaign with them on the ground in the member states, in an effort to give a broader political mandate to, and link between, the European Parliament and the Commission. Other proposals from Brussels, such as transnational party lists or others, aim to deepen political integration but they require significant treaty changes for measures that are merely cosmetic.

In Brussels, I have always argued that treaty changes can be difficult but if they are unavoidable, we must make them count. Measures to enhance living standards across the EU are bound to have more legitimating outcomes than fanciful daydreams. Any suggestions proposed by FEPS would require new treaties, especially those requiring institutional transformation, such as changing deficit rules or a proposed employment and stability pact. It is also very important that the politicisation of Europe is evident at member state level.

Europe is often presented as a monolith where one is either pro or anti-EU. It is not always readily apparent that there are diverse and conflicting ambitions for EU integration. In this sense, legitimacy depends on being given a political choice and European political parties have a vital role to play in this regard. In recent years, populist voices have grown louder as the politics of grand coalition and consensus invite charges of cosy elitism. Furthermore, the tendency for governments to hide behind the EU when implementing unpopular measures has damaged the credibility of the European Union in certain member states. On the question of how far integration should go, the gap between the inherently ethical nature of public decision-making and the utilitarian nature of much of modern debate in many parts of the world has pushed a wedge between citizens and their representative institutions. Political discourse is limited. Alternative paradigms are rejected and unconventional thought is dismissed. Taken to the European level, the constraints imposed on fiscal policy by ideological positions upheld in the treaties have put into law the idea that there are no alternatives. The net effect has been suspicion of further integration.

There are very significant benefits from further integration, but only if it is on appropriate political and economic terms. Citizens need to see their public institutions as symbols of power held in common. In Europe, this means adhering to the community method, giving the appropriate role to the European Parliament and linking this to the national parliaments in a constructive relationship.

Democratic legitimacy and accountability can be enhanced in a number of ways. In economic, budgetary and fiscal matters, the Foundation for European Progressive Studies advocates a politically accountable ECB and the use of the European Investment Bank as a means of stimulating investment in the real economy with a focus on job creation. Further political integration must be linked to the idea of improving citizens' living standards. Therefore, the legislative framework of the EU needs a link to preferred social and economic outcomes.

I thank the committee for its kind invitation.