, 17 tweets, 10 min read Read on Twitter
This is a great, thought-provoking speech by #Draghi, on European sovereignty. Though I disagree with some parts, the final part on “rules vs. institutions” is excellent. A thread. ecb.europa.eu/press/key/date…
Draghi starts out with the alleged conflict between EU membership and #sovereignty, which is crucial to understand the populism of #Brexit, Le Pen et al. He says: no conflict at all, to the contrary.
“True #sovereignty is reflected not in the power of making laws – as a legal definition would have it – but in the ability to control #outcomes … The ability to make independent decisions does not guarantee countries such control,” says Draghi.
In the environment that we lived in, with globalization on many fronts affecting us all, [small and medium-sized] countries would need to work together to exercise sovereignty. #Draghi
The analytical part of Draghis speech contains three main arguments: how the EU protects against #spillovers; how it makes sure its members are not #rule-takers; and how they can protect #social standards without protectionism.
On the #euro, he argues that it limits spillovers from abroad (true), and goes on to argue that the pre-euro period, where everybody had to follow the #Bundesbank, was “disappointing, if not devastating”. (Well.)
The part on #regulatory power and sovereignty is great subtweeting of #Brexit delusions, and #Draghi is right that the EU (as a big global rule maker) can uphold its standards. Where his speech goes off the rails is on #taxation.
#Draghi *should* have argued that taxation is a great example how a failure to share sovereignty in the EU undermines everyone’s sovereignty, by allowing a race-to-the-bottom on corporate #taxes.
Instead, #Draghi argues that “the EU gives its members the capacity to prevent multinationals from avoiding corporation tax by exploiting loopholes or extracting subsidies.” I guess @gabriel_zucman, @Brad_Setser et al would beg to differ.
This is even more ironic, as #Draghi describes the mechanism of a race-to-the-bottom when it comes to social standards – but in the pre-Great Depression United States.
But now comes the best part of Draghis speech. On the *how * of cooperation. He says that loose #cooperation among nation-states is sustainable, when “all parties benefit equally”. But then:
The EU had two modes of cooperation, #Draghi says: create common institutions with executive power (EU Com on trade, #ECB on monetary policy) – or coordinating national policies through rules, such as the SGP. (You know where this is going, right?)
#Draghi says the rules-based approach were born out of the conviction that national sovereignty had to be preserved; common rules were the only choice. He adds: “But it is worthwhile to reflect on how successful this choice has been.” No shit.
#Draghi rightly argues that institutions vs. rules had a clear winner: #institutions. Not because of lower ability of national governments, of course not. He gives two reasons.
First, #institutions can use discretion when circumstances change. (Cf. the economic anachronism that is the German debt brake.) And the use of this discretion enhanced #credibility, says #Draghi. “By contrast, rules lose credibility if they are applied with discretion.”
Second, #institutions can be subject to democratic control (ie are accountable). Rules are not. The combination of “mandate and defined powers” enabled a direct link between decisions and responsibility, acc to #Draghi.
I will end this thread with #Draghis conclusions on #sovereignty and the future of the EU, which I share. /end
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