In the shadow of the Brexit negotiations, the EU is changing. A European Monetary Fund to battle the next crisis, new rules on national fiscal policy, proposals to boost structural reforms in the Member States or to protect investment in the event of a downturn, even perhaps a Minister of Finance for the Eurozone. The financial sector would not be left untouched either: bold measures to reduce risks in the financial system, proposals to complete the Banking Union and work towards a Capital Markets Union, as well as more ‘radical’ ideas to issue new financial instruments (including for the common issuance of debt). The proposed reforms would radically change, if implemented, the legal and institutional framework of the Eurozone. They put the idea that the EU is in shambles over the Eurozone to the test.

In our chapter on ‘EMU reform’, available on SSRN, we discuss that three factors underpin those reforms. First, the EU institutions clearly wish that the proposed reforms be accommodated within the existing EU Treaties, such that the Pandora’s box of Treaty revision would not be opened. This also means that the EU’s reform ambitions are circumscribed by the limits of EU competence. Second, there is support for a return to Treaty orthodoxy, which signifies in this context that the international treaties concluded outside the confines of the EU Treaties should be brought into the fabric of EU law. Third, the idea of institutional adaptation is equally evident: better to take tried and tested rules and institutions, rather than to embark on a presumably rocky, and most certainly unpredictable, process of inventing something new from scratch.

The likely direction of change will emerge over time, and the end result of these reform efforts will not be purely determined by economics. The EU is quintessentially the art of the possible, and politics is of considerable importance in determining the parameters in this respect. Measured on their substance, the proposed reforms seek to plug the gaps in the existing framework, such that the Eurozone architecture would be rendered more robust. The EU is proposing to do much more on those fronts that had originally been neglected in the Maastricht framework: promoting structural reforms at the national level (including through EU assistance); and increasing the Eurozone’s capacity to respond to asymmetric shocks. This perforce means that the EU institutions favour ‘more Europe’ over the other scenarios for its future. Eurosceptics will take note. Nevertheless, leaving the Eurozone vulnerable to a future crisis would also hurt the EU’s legitimacy.

It is axiomatic that the extent of reform in the area of Economic and Monetary Union (EMU) and the concomitant transfer of powers from the national to the EU authorities should be matched by increased democratic controls and robust accountability mechanisms. There are two key ideas behind the EU institutions’ thinking in this area. First, accountability should be ensured at the level at which decisions are made (national, EU, and so on), which would entail a stronger role for the European Parliament, Council and Commission as accountability holders whenever measures are enacted at the EU level. Second, Treaty accommodation, combined with a return to Treaty orthodoxy, would perforce enhance accountability and transparency, as well as efficiency, in the area of EMU. We do not, however, yet have a ‘grand design’ for enhancing accountability in a deep and genuine EMU, such that further issues or questions remain. What should for example be the role of national parliaments in EMU? With the EU making yet more inroads into national regular autonomy and acquiring powers that would touch upon core parliamentary prerogatives (such as the proposal for a euro area Treasury), the issue will inevitably resurface with yet more urgency. Moreover, the EU’s machinery of accountability and transparency is indeed superior to what would have existed outside the confines of the EU Treaties, but is far from perfect. The extent to which the institutions and bodies acting in EMU could be rendered accountable for the exercise of their duties would be circumscribed by the limits to political, legal, etc accountability that are hardwired into the Treaties and/or laid down in secondary law. It should not just be assumed that the forms or types of accountability that existed with respect to, say, the Commission or the European Central Bank would also be sufficient if the powers of the latter institutions were to be substantially expanded. The imperatives of Treaty accommodation and institutional adaptation have thus far prevented the EU institutions from thinking out loudly, as it were, on how to fix those deficiencies. More is required by way of transparency, accountability and, yes, efficiency.

Our chapter is also forthcoming in Fabian Amtenbrink and Christoph Herrmann, The EU Law of Economic and Monetary Union (OUP 2019).

Paul Craig is Professor of English Law, Oxford Law Faculty.

Menelaos Markakis is Post-Doctoral Researcher at the Erasmus University Rotterdam.