Charting and Testing the National Constitutional Limits to EU Fiscal Integration

I am honored to have been invited to introduce my 2021 PhD-thesis titled “A Ministry of Finance? Charting and Testing the National Constitutional Limits to EU Fiscal Integration”, published in the series of the Meijers Research Institute and Graduate School of Leiden Law School (Leiden University) on the pages of Constitutional Discourse.

The EU financial and sovereign debt crisis – better known as the Eurocrisis – erupted in late 2009 with destructive force. It threatened the survival of the EU’s single currency and thereby endangered the entire European integration process. The crisis revealed that the Euro suffers from major structural deficiencies, formally embedded into the Economic and Monetary Union’s (EMU) legal framework. And despite initial emergency fixes undertaken during the peak of the crisis, it is accepted that more comprehensive reforms are necessary to remedy this deficient EMU structure. The remaining flaws are currently in the spotlight again due to the economic consequences of COVID-19. It is by now widely acknowledged that some form of EU fiscal integration is necessary to remedy these structural flaws and achieve a stable euro in the long run. To clarify, the research employs the concept of EU fiscal integration as a broad, open-ended umbrella-term that encompasses all decisions on public expenditure and revenue, including on taxation and debt-issuing. Subsequently, this open-ended term is rendered more specific based on concrete EU fiscal integration proposals. Despite the apparent necessity of EU fiscal integration, the room for such integration steps seems strictly delimited by national constitutional concerns, as was only recently illustrated by the German PSPP-judgment and the reluctant stance of the Finnish Constitutional Law Committee in relation to Next Generation EU. Metaphorically speaking, these two constitutional decisions are only the tip of a much larger iceberg of critical national constitutional views formulated against the conferral of core state powers to the supranational level – including in particular national budgetary and fiscal prerogatives that would ultimately be altered by the proposed EU fiscal integration steps. National constitutional law therefore formulates hard limits against the surrender of fiscal, budgetary or economic powers to the EU. The result is a fundamental dilemma: on the one hand, effective EU fiscal integration seems necessary to stabilize the common currency and avoid an even more costly crisis. On the other hand, fiscal integration in the EU appears to be legally impossible, given the limits imposed by national constitutional systems and the need to respect national democracy and sovereignty.

Faced with this apparent dilemma, my research conducts a comparative assessment of a selection of national constitutional limits that are applicable to EU fiscal integration in order to investigate the dilemma’s legal-constitutional parameter. The research thereby determines how similarly – or differently – national constitutional systems address the very same EU integration ambition in order to determine what EU integration steps are compatible with national constitutional law. The research is hence divided into two different conceptual parts. In the first part, the available national constitutional space for EU fiscal integration is charted and dismantled. The chosen comparative setting allows to focus on a selection of representative national constitutional approaches and to identify national constitutional best practices. These best practices could be potentially employed in other Member States to locate additional constitutional space for EU fiscal integration whilst maintaining – or even increasing – the effective protection of core constitutional concerns. In the second part of the research, the previously charted national constitutional space is tested against the most authoritative fiscal integration reform proposals debated within the EU in order to evaluate and determine their national constitutional attainability.

More specifically, as previously indicated, Part I compares a selection of national constitutional constraints that set limits to EU fiscal integration ambitions. Confronted with 27 national constitutional strategies to manage EU integration, the research is delimited to a representative sample of national constitutional approaches and limitations imposed against these integration ambitions. It identifies two principal archetypes of how constitutional systems approach EU integration. On the one hand, a range of national constitutional systems developed more rigid constitutional approaches to EU integration that formulate strict substantive limits – or as Mattias Wendel calls them “red-lines” – for EU integration, traditionally determined by strong and independent constitutional actors. As a conceptual opposite to constitutional rigidity, some Member States have adopted more flexible constitutional approaches, where the main constitutional hurdle for EU integration is political-procedural in nature. Given that EU fiscal integration proposals will have to fit the constitutional space available under rigid as well as flexible constitutional approaches, the research conducts a wide charting and dismantling of national constitutional limits in the respective systems taking Germany as study case for rigid and Finland as study case for more flexible constitutional approaches. This assessment reveals that constitutional identity limits are seemingly the most serious legal-constitutional hurdle for EU fiscal integration ambitions. Therefore, the subsequent comparative assessment focused on the French, German, Polish and Spanish constitutional identity limit to determine their possible limiting effect for EU fiscal integration. Taken together, Part I thus establishes what the current legal space for EU fiscal integration is, and to what extent more space can be created by applying the outlined constitutional best practices.

Part II then examines whether the most authoritative reform proposals for EU fiscal integration are feasible within the available constitutional space. In other words, are the proposals currently on the table legally feasible? And conversely, what form of fiscal integration is maximally achievable within the available national constitutional space? This entails first the identification of the most relevant and authoritative EU fiscal integration proposals. These proposals are subsequently broken down into core components following a two-fold functional approach, which organizes the proposed fiscal integration steps first based on substantive elements (such as the creation of a fiscal capacity or the creation of new institutional-administrative structures) and second based on the envisaged degree of EU control. Subsequently, the deconstructed EU fiscal integration steps are tested against the previously charted national constitutional space to determine their attainability. The resulting overview outlines possible constitutional conflicts and remedies to address such conflicts both at the national constitutional level as well as when devising these EMU reform plans.

Based on this analysis, the research shows that there are important and far-reaching national constitutional limitations to EU fiscal integration. At the same time, even in the most rigid national constitutional systems, legal space can be found and created for some degree of EU fiscal integration, provided it is well designed.

In order to further reduce the tension between fiscal integration ambitions and national constitutional law, without renouncing national constitutional core values, the dissertation introduces two concrete proposals:

Firstly, the research proposes to integrate the explicit and implicit benefits resulting from EU fiscal integration into the national constitutional assessment of integration. This would modernize the prevailing state-centric or competence-centric interpretation of national sovereignty and democracy, so that it better matches the actual interests of Member States and their citizens. National constitutional actors can achieve this modernized understanding by following two strategies developed within the research: On the one hand, the research identified a constitutional double standard in the interpretation and application of national constitutional law – particularly in Germany – to the disadvantage of EU integration. Hence, by applying a consistent interpretation of national constitutional law, additional constitutional space can be located for EU fiscal integration. And, on the other hand, constitutional actors can draw inspiration from constitutional best practices identified, for example, in the Finnish constitutional order.

Secondly, the thesis proposes to better adapt the current proposals for EU fiscal integration to the limits that inherently result from the nature and content of the various national constitutions and the well-founded concerns of several constitutional actors that oversee these constitutions. These adjustments can constructively take into account the identified national constitutional constraints and shape fiscal integration in such a way as to go along with and leave room for national constitutional debate. One concrete possibility for institutional amendment at the EU level to address these national concerns is the establishment of a Eurozone Forum of National Parliamentary Delegates. This Forum would be exclusively composed of national parliamentary delegates and thus integrate the national parliamentary level better into EMU decision-making, which could address the identified concerns of national constitutional authorities regarding EU fiscal integration and the required degree of national parliamentary control over budgetary and fiscal decision-making. The proposed Forum would complement the existing informal general dialogue of COSAC and could guarantee that the fiscal decision-making process at EU level is in sync with the national processes.

Ultimately, these two proposals could help to break the apparent dilemma between the need for EU fiscal integration and respect for national constitutional boundaries. Overall, EU integration is a process of continuous amendments, challenges and transformation. Increasingly, this process conflicts with traditional characteristics of the national constitutional space, which can explain the emergence of national constitutional identity limits as a new type of constitutional defense mechanism. Through these limits, national constitutional authorities attempt to contain EU integration and preserve national constitutional structures in light of an ever-deepening integration. Although the research illustrates that national constitutional systems can be receptive towards the various benefits that stem from supranational cooperation, this receptiveness is increasingly limited as EU integration advances towards the core of national systems: their constitutional identity. EU fiscal integration ambitions squarely fit into this general trend, as they propose a shift of core constitutional and political competences from the national to the supranational level. Naturally, this proposed shift is met with national constitutional resistance displayed in the various constitutional proceedings in the Member States assessed within the research. The PhD-manuscript argues that overcoming these national constitutional challenges against EU fiscal integration – but also against EU cooperation in core state areas generally – might require initiating a new chapter in national and supranational constitutionalism. After all, EU integration and national constitutional law are not opponents but can and should be mutually reinforcing allies in a globalized world.

Frederik BEHRE is a postdoctoral researcher at the Europa Institute (Leiden University). He completed his PhD-degree in October 2021, focusing in his research on a comparative assessment of the national constitutional limits to EU fiscal integration. Frederik graduated from the European Law LL.M. programme at Leiden University. Previously, he studied German Law and completed the LL.B. programme on Information Technology and Intellectual Property Law at Leibniz University (Hannover, Germany). In addition, Frederik completed the Europaeum Scholars Programme (first cohort), a PhD-programme organized by Oxford University and the Europaeum network.

In his research, Frederik is particularly interested in the interaction between national constitutional law and EU law, including a focus on comparative constitutional research. He explores the challenges and opportunities of this interaction through substantive areas of the law, such as the Economic and Monetary Union and most recently EU climate change and environmental regulation. Frederik is also interested in comparative regional integration law and the potential to exchange legal experiences across different regional integration projects globally.