The Transformation of Economic Constitutionalism in EMU: Market Rationale and ‘As If’ Politics

In 1992, The Maastricht Treaty added a new layer at the European Economic Constitution: the Economic and Monetary Union (EMU). However, in the aftermath of the Great Recession of 2008, the sovereign debt crisis has called into question the soundness and sustainability of this ‘Macroeconomic Constitution’. In order to counter the risk of eurozone collapse, numerous reforms have been adopted, leading to a ‘new architecture’ of the European Economic Governance. But have these reforms changed the conceptual and ideological underpinnings of EMU ? According to Vivien Schmidt, they did: EU institutions’ discourses and actions during the eurozone crisis reveal a shift in the interpretation of the Treaties and what emerges is a technocratic framework (‘Governing by Rules and Governing by Numbers) that undermines the legitimacy of European integration. However, Michael Wilkinson traces this technocratic structure back to the very foundations of Economic and Monetary Union (and even to the very foundations of the European integration process), which, he argues, have been compromised from the outset by the ‘soft authoritarianism’ of neoliberal economic constitutionalism.
I would like to explore and discuss these two arguments by analysing the transformation of economic constitutionalism in EMU. My contention is as follows : EMU was indeed founded from the outset on a market rationale based on neoliberal constitutional theories, as Wilkinson has pointed out; but, as Schmidt has argued, the post-crisis reforms do nevertheless suggest a real shift in the interpretation of the rules of the Treaties – and of the market rationale enshrined in these rules; this shift, however, has remained within the boundaries of neoliberal thinking, for the advent of ‘As If’ politics (Als-Ob Politik) actually marks a departure from the neoliberal orthodoxy as well as a legal revival of old ordoliberalism.
On the one hand, the foundations of the EMU have not changed. The ‘constitutional’ rules of EMU are (almost) still the same (except for article 136(3) TFEU). Monetary policy is still conducted by an independent central bank with the (absolute) primary objective of price stability. Economic and budgetary policies are still decentralized but subject to ‘market-oriented’ supervision in order to ensure that budgets are balanced. such a structure is directly inspired by the neoliberal economic constitutionalism developed since the 1970’s by New Classical Macroeconomics and the Virginia School, based on the Hayekian ‘catallactic’ conception of the market functioning. The underlying legal rationale of EMU was, is and remains to neutralise Keynesian policies, discredited on the basis of ‘rational expectations’, and to impose market discipline on Member States.
On the other hand, the management of the eurozone crisis appears to be a mixture of regulatory interventions in the economic process and structural reforms of the legal framework. On the first level (Wirtschaftsprozess), the ECB’s ‘unconventional’ policies and the ‘financial assistance’ served to guarantee the necessary short-term stability of the system. At the second level (Ordnungsrahmen), several legal adjustments were made to EMU: the Six Pack and the Two Pack were adopted to strengthen the surveillance and control of national economic and budgetary policies through the new European Semester; the strict conditionality attached to the ‘financial assistance’ mechanisms was consolidated in the ESM; the TSCG was adopted to transpose European budgetary constraints into national law. Thus, the market rationale is still maintained as the basic norm of EMU, but since actual markets are now deemed fallible by the ECJ (Gauweiler), it is now the EU institutions that take on the task of imposing structural reforms on Member States ‘as if’ the market constraint was working properly (Pringle). This New Economic Governance and the discourse of the EU institutions therefore depart from the ‘neoliberal’ orthodoxy, centred on the superiority of real markets (Hayek), and move closer to the old ordoliberal roots of economic constitutionalism, where public authority has an explicit tutelary role in protecting the disciplinary market logic, even against actual markets.
Paradoxically, this ordoliberal ‘as if’ politics challenges the dogma of the self-regulating and efficient markets… but it does not alter the technocratic nature of the EMU structure – quite the contrary: it deepens it.