Democratic Deficit in the European Stability
Mechanism
Module 2: European Stability Mechanism
,Introduction
In this paper I would like to address the identification of a problem,
regarding democratic shortcoming in the European Stability Mechanism
(ESM). I will use relevant legal provisions to support this identification.
Finally, I will make a proposal for reform, where specific legal reforms,
which could address the democratic deficit, are suggested.
Identification of the Problem
The problem concerning the democratic deficit in the ESM involves a lack
of transparency, accountability and legitimacy. The ESM operates as an
intergovernmental institution established under public international law,
but the ESM uses the European Commission and the European Central
Bank (ECB) into its framework, effectively adopting them from the legal
structure of the European Union (EU).
However, assigning responsibilities to EU institutions beyond the
jurisdiction of EU law, without the participation of the European Parliament
(EP) and the Council in the decision-making process went against the
principle of EU institutional balance. This principle legitimises the decisions
taken at EU level by ensuring that varied interests are represented.1 Article
10(2) TEU says that citizens are directly represented at Union level in the
European Parliament.2 The EP is currently absent from the ESM Treaty
(ESMT).3 This can be considered problematic, because the members of the
European Parliament are directly elected by EU citizens and the ESM still
engages with other EU institutions, despite falling outside EU law.4 The
1
Anastasia Karatzia and Menelaos Markakis, "What role for the Commission and the ECB
in the European Stability Mechanism?," Cambridge International Law Journal 6, no. 2
(December 2017): 238-239.
2
European Union, Consolidated Version of the Treaty on European Union, OJ C 202,
26.10.2012, C 326/13- C 326/45
3
European Stability Mechanism, Treaty Establishing the ESM, signed on 2 February 2012-
consolidated version following Croatia’s accession to the ESM, 2.2.2012, 1-62
4
Anastasia Karatzia and Menelaos Markakis, "What role for the Commission and the ECB
in the European Stability Mechanism?," Cambridge International Law Journal 6, no. 2
2
,members of these institutions and other important decision-making actors,
such as the Board of Governors and Board of Directors are not directly
elected by the people.5 6 7
Due to the lack of involvement of the EP, there is a deficiency within the
ESM, regarding democratic legitimacy: ‘’the justification of the exercise of
public authority in a democratic polity.’’ Especially input legitimacy
(‘government by the people’), which must be achieved through electoral
processes, direct democratic tools like referendums and active
participation, is at stake.8
The authority to adopt decisions lies solely with the Board of Governors
and the Board of Directors, with neither the Commission nor the ECB being
integral components of the ESM's governance structure. Despite this, there
is some uncertainty about the specific roles of the Commission and the
ECB.9 The ESMT does not offer additional information regarding the
specific responsibilities of the Commission and the ECB, nor does it clarify
how these institutions are supposed to carry out their duties. Additionally,
there is no publicly available documentation or guidelines outlining the
(December 2017): 238-239.
5
European Stability Mechanism, Treaty Establishing the ESM, signed on 2 February 2012-
consolidated version following Croatia’s accession to the ESM, 2.2.2012, 1-62
6
‘’Elections and Appointments for EU Institutions,’’ European Union, n.d., Elections and
appointments - institutions | European Union (europa.eu).
7
European Union, Consolidated Version of the Treaty on the Functioning of the
European Union, OJ C 326,
26.10.2012, C 326/47- C 326/390
8
Fritz W. Scharpf, "Problem Solving Effectiveness and Democratic Accountability in the
EU," Political Science Series 107, (February 2006): 1-5.
9
Anastasia Karatzia and Menelaos Markakis, "What role for the Commission and the ECB in
the European Stability Mechanism?," Cambridge International Law Journal 6, no. 2
(December 2017): 234-238.
3
, positions of these two institutions in past bailout negotiations. Moreover,
transparency is limited due to confidentiality obligations.10
This lack of clarity and transparency regarding the functioning of these
institutions makes it even more problematic that the European Parliament
cannot interfere in this situation. Transparency, which ensures widespread
availability of information, is an important good of accountability. Access to
information is vital for accountability in various contexts, especially for
democratic oversight.11
This means that there is also a problem with regard to accountability.
‘’Accountability is a relationship between an actor and a forum, in which
the actor has an obligation to explain and to justify his or her conduct, the
forum can pose questions and pass judgement, and the actor may face
consequences.’’12 For instance, towards parliaments or other political fora
(political accountability) and courts (legal accountability).13
According to Bovens, ensuring accountability is crucial as it offers a
democratic mechanism to oversee and regulate government actions, thus
preventing the accumulation of excessive power.14 Moreover, its
significance indirectly stems from its role in maintaining or even elevating
the legitimacy of governance. This outcome is partly influenced by the
other impacts, such as democratic oversight, balancing of power, and
responsiveness, all of which contribute to bolstering the credibility of the
administration.15 However, since the European Parliament is absent of the
10
Anastasia Karatzia and Menelaos Markakis, "What role for the Commission and the ECB in
the European Stability Mechanism?," Cambridge International Law Journal 6, no. 2
(December 2017): 234-242.
Ruth Grant and Robert Keohane, ‘’Accountability and Abuses of Power in World Politics,’’
11
American Political Science Review 99, no. 1 (February 2005): 39-40.
12
Mark Bovens, ‘’Analysing and Assessing Accountability: A Conceptual Framework,’’
European Law Journal 13, (7 June 2007): 450.
13
Mark Bovens, ‘’Analysing and Assessing Accountability: A Conceptual Framework,’’
European Law Journal 13, (7 June 2007): 454-457.
14
Mark Bovens, ‘’Analysing and Assessing Accountability: A Conceptual Framework,’’
European Law Journal 13, (7 June 2007): 462.
15
4
Mechanism
Module 2: European Stability Mechanism
,Introduction
In this paper I would like to address the identification of a problem,
regarding democratic shortcoming in the European Stability Mechanism
(ESM). I will use relevant legal provisions to support this identification.
Finally, I will make a proposal for reform, where specific legal reforms,
which could address the democratic deficit, are suggested.
Identification of the Problem
The problem concerning the democratic deficit in the ESM involves a lack
of transparency, accountability and legitimacy. The ESM operates as an
intergovernmental institution established under public international law,
but the ESM uses the European Commission and the European Central
Bank (ECB) into its framework, effectively adopting them from the legal
structure of the European Union (EU).
However, assigning responsibilities to EU institutions beyond the
jurisdiction of EU law, without the participation of the European Parliament
(EP) and the Council in the decision-making process went against the
principle of EU institutional balance. This principle legitimises the decisions
taken at EU level by ensuring that varied interests are represented.1 Article
10(2) TEU says that citizens are directly represented at Union level in the
European Parliament.2 The EP is currently absent from the ESM Treaty
(ESMT).3 This can be considered problematic, because the members of the
European Parliament are directly elected by EU citizens and the ESM still
engages with other EU institutions, despite falling outside EU law.4 The
1
Anastasia Karatzia and Menelaos Markakis, "What role for the Commission and the ECB
in the European Stability Mechanism?," Cambridge International Law Journal 6, no. 2
(December 2017): 238-239.
2
European Union, Consolidated Version of the Treaty on European Union, OJ C 202,
26.10.2012, C 326/13- C 326/45
3
European Stability Mechanism, Treaty Establishing the ESM, signed on 2 February 2012-
consolidated version following Croatia’s accession to the ESM, 2.2.2012, 1-62
4
Anastasia Karatzia and Menelaos Markakis, "What role for the Commission and the ECB
in the European Stability Mechanism?," Cambridge International Law Journal 6, no. 2
2
,members of these institutions and other important decision-making actors,
such as the Board of Governors and Board of Directors are not directly
elected by the people.5 6 7
Due to the lack of involvement of the EP, there is a deficiency within the
ESM, regarding democratic legitimacy: ‘’the justification of the exercise of
public authority in a democratic polity.’’ Especially input legitimacy
(‘government by the people’), which must be achieved through electoral
processes, direct democratic tools like referendums and active
participation, is at stake.8
The authority to adopt decisions lies solely with the Board of Governors
and the Board of Directors, with neither the Commission nor the ECB being
integral components of the ESM's governance structure. Despite this, there
is some uncertainty about the specific roles of the Commission and the
ECB.9 The ESMT does not offer additional information regarding the
specific responsibilities of the Commission and the ECB, nor does it clarify
how these institutions are supposed to carry out their duties. Additionally,
there is no publicly available documentation or guidelines outlining the
(December 2017): 238-239.
5
European Stability Mechanism, Treaty Establishing the ESM, signed on 2 February 2012-
consolidated version following Croatia’s accession to the ESM, 2.2.2012, 1-62
6
‘’Elections and Appointments for EU Institutions,’’ European Union, n.d., Elections and
appointments - institutions | European Union (europa.eu).
7
European Union, Consolidated Version of the Treaty on the Functioning of the
European Union, OJ C 326,
26.10.2012, C 326/47- C 326/390
8
Fritz W. Scharpf, "Problem Solving Effectiveness and Democratic Accountability in the
EU," Political Science Series 107, (February 2006): 1-5.
9
Anastasia Karatzia and Menelaos Markakis, "What role for the Commission and the ECB in
the European Stability Mechanism?," Cambridge International Law Journal 6, no. 2
(December 2017): 234-238.
3
, positions of these two institutions in past bailout negotiations. Moreover,
transparency is limited due to confidentiality obligations.10
This lack of clarity and transparency regarding the functioning of these
institutions makes it even more problematic that the European Parliament
cannot interfere in this situation. Transparency, which ensures widespread
availability of information, is an important good of accountability. Access to
information is vital for accountability in various contexts, especially for
democratic oversight.11
This means that there is also a problem with regard to accountability.
‘’Accountability is a relationship between an actor and a forum, in which
the actor has an obligation to explain and to justify his or her conduct, the
forum can pose questions and pass judgement, and the actor may face
consequences.’’12 For instance, towards parliaments or other political fora
(political accountability) and courts (legal accountability).13
According to Bovens, ensuring accountability is crucial as it offers a
democratic mechanism to oversee and regulate government actions, thus
preventing the accumulation of excessive power.14 Moreover, its
significance indirectly stems from its role in maintaining or even elevating
the legitimacy of governance. This outcome is partly influenced by the
other impacts, such as democratic oversight, balancing of power, and
responsiveness, all of which contribute to bolstering the credibility of the
administration.15 However, since the European Parliament is absent of the
10
Anastasia Karatzia and Menelaos Markakis, "What role for the Commission and the ECB in
the European Stability Mechanism?," Cambridge International Law Journal 6, no. 2
(December 2017): 234-242.
Ruth Grant and Robert Keohane, ‘’Accountability and Abuses of Power in World Politics,’’
11
American Political Science Review 99, no. 1 (February 2005): 39-40.
12
Mark Bovens, ‘’Analysing and Assessing Accountability: A Conceptual Framework,’’
European Law Journal 13, (7 June 2007): 450.
13
Mark Bovens, ‘’Analysing and Assessing Accountability: A Conceptual Framework,’’
European Law Journal 13, (7 June 2007): 454-457.
14
Mark Bovens, ‘’Analysing and Assessing Accountability: A Conceptual Framework,’’
European Law Journal 13, (7 June 2007): 462.
15
4
