Monetary Union, Fiscal Crisis and the Preemption of Democracy

The European Monetary Union (EMU) has removed crucial instruments of macroeconomic management from the control of democratically accountable governments. Worse yet, it has been the systemic cause of destabilizing macroeconomic imbalances that member states found difficult or impossible to counteract with their remaining policy instruments. And even though the international financial crisis had its origins outside Europe, the Monetary Union has greatly increased the vulnerability of some member states to its repercussions. Its effects have undermined the economic and fiscal viability of some EMU member states, and they have frustrated political demands and expectations to an extent that may yet transform the economic crisis into a crisis of democratic legitimacy. Moreover, present efforts of EMU governments to “rescue the Euro” will do little to correct economic imbalances and vulnerabilities, but are likely to deepen economic problems and political alienation in both, the rescued and the rescuing polities.