New forms of government induced by crisis management

Abstract

The euro was introduced during the so-called Great Moderation, a time when there was continual economic growth on both sides of the Atlantic with no inflationary stress1. Then, suddenly, the financial crisis struck in 2008. The European Union opted for austerity. That decision implied a constitutional experiment, since for the first time democratic institutions were used to take decisions that led directly to a net impoverishment of the population. The classic recipes were left behind, some because they were legally impossible such as devaluation of the currency, and others were politically unfeasible such as an increase in spending.

It is true that austerity was not at all anything new. It had been applied in Latin America since the nineties. But in this case, there were some elements that indicated a qualitative change. Firstly, there was its generalisation as a solution, since it was defined as a rule applicable to all the states that shared the euro and had problems of liquidity and solvency. Secondly, there was its undisputed nature: it is true that there was a heated academic and political debate in which alternatives were proposed, but they never came close to truly influencing the decision-making. Thirdly, austerity directly affected the arrangement of the welfare state, which had been a distinctive feature of European constitutional democracy compared to other kinds.

This qualitative leap could be seen as the definitive step towards establishing the neoliberal ideology3. However, the response being articulated as a result of the crisis caused by the coronavirus is creating many nuances and without a doubt it has reined in the all-encompassing influence of the austerity policies, at least in the short term. In this context, this essay intends to analyse the consequences of the handling of the financial crisis (and partly of the pandemic crisis) on the EU’s system of government. The initial premise is that the EU’s system of government since its beginnings has been structured upon the two principles of technical independence and national democracy, backed by clear constitutional theories. Later, a third principle will be added, which is that of supranational democracy, also with a clear constitutional foundation. My analysis is going to concentrate on studying how the handling of the financial crisis has introduced relevant modifications, without putting an end to the aforementioned institutional principles. As far as possible, some explanations will be given based on the response given to the coronavirus crisis.