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Democracy Lost: The Financial Crisis in

Europe and the Role of Civil Society
a
Mario Pianta
a
Department of Economics, Society and Politics , University of
Urbino , Urbino , Italy
Published online: 16 May 2013.

To cite this article: Mario Pianta (2013) Democracy Lost: The Financial Crisis in Europe and the Role
of Civil Society, Journal of Civil Society, 9:2, 148-161, DOI: 10.1080/17448689.2013.788927

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 Journal of Civil Society, 2013
Vol. 9, No. 2, 148 –161, http://dx.doi.org/10.1080/17448689.2013.788927

Democracy Lost: The Financial Crisis in

Europe and the Role of Civil Society

MARIO PIANTA
Downloaded by [University of South Florida] at 11:33 30 October 2014

Department of Economics, Society and Politics, University of Urbino, Urbino, Italy

ABSTRACT The trajectory of European integration has long been marked by a democratic deficit.
The global financial crisis and, in particular, the so-called Euro crisis has led to further losses of
democratic accountability, with major decisions being imposed on parliaments and citizens of
European Union countries without adequate deliberation. This essay examines such
developments, arguing that neoliberal reforms and financial powers have invariably impoverished
democracy in Europe, while reactions within civil society grow stronger by the day. Nevertheless,
civil society forces are still divided with respect to the question of how to strengthen democratic
participation and accountability both at the national and supranational level, as divisions
between ’federalist’ and ‘sovereignist’ approaches are all but present within the European civic
arena.

KEY WORDS : Financial crisis, Europe, civil society, activism, democracy, politics

Introduction: Neoliberalism vs. Democracy

The balance between capitalism and democracy has been seriously tilted in the 30 years of
neoliberalism. The ideology that markets rule, the state has to withdraw and society ‘does
not exist’ (in Thatcher’s famous phrase) has shaped today’s world—and has led to today’s
crisis, the most serious in Europe and the USA since the Great Depression of the 1930s.
Democracy—even in the tamed form of liberal democracy—has been a major victim of
neoliberalism. Shifting authority from states to markets, from national to global processes,
has weakened the legitimacy and power of governments to control economic activities and
social outcomes. The role of states in regulating production and distribution and in provid-
ing welfare services to society has been reduced; governments have become less and less
able to implement decisions taken through the political process, weakening the mechan-
isms of democracy. The results have been worsening economic performance, social con-
ditions, and political legitimacy in Western countries.1

Correspondence Address: Mario Pianta, Department of Economics, Society and Politics, University of Urbino,
Via Saffi 42, 61029 Urbino, Italy. Email: mario.pianta@uniurb.it

# 2013 Taylor & Francis

 Democracy lost 149

In parallel, the rise of global finance promised a new cycle of growth, but in fact
strengthened the power of Wall Street and the City of London, weakening the rest of
the economy. It led to rapidly growing income and wealth of the very rich in all
countries—an economy benefitting the 1% only. The de-materialized nature of financial
transactions and the liberalization of capital movements, trade, exchange rates, etc.
meant that finance could operate largely outside the control of governments; political auth-
ority did not extend anymore over its activities; finance operated in a democracy-free
space.
The forms of regulation—when needed—were taken away from political authority and
handed over to ‘technocratic’ power—such as central banks independent from govern-
ments. Self-appointed private ‘judges’ such as the rating agencies have emerged to
assess financial solidity and major accounting companies to certify budgets. The lack of
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democratic processes, accountability, and transparency has become the norm in economic
decisions that affect all countries.
The trajectory of European integration is a major example of how neoliberalism has
defeated deep-rooted forms of social cohesion and democratic voices. This essay analyses
how the growth of neoliberalism has eroded the power of nation states and their citizens to
steer policy-making processes, even in a continent traditionally regarded as the cradle of
social democracy. To the detriment of Europe’s social and political stability, the economic
integration process led by the European Union’s (EU) authorities has become a textbook
case of what could be termed ‘de-democratization’.

The Founding Flaws of European Integration

In 1989, the future of Europe was charted by the Delors Commission in the following way:

Economic and monetary union in Europe would imply complete freedom of move-
ment for persons, goods, services and capital, as well as irrevocably fixed exchange
rates between national currencies and, finally, a single currency. This, in turn, would
imply a common monetary policy and require a high degree of compatibility of
economic policies and consistency in a number of other policy areas, particularly
in the fiscal field. These policies should be geared to price stability, balanced
growth, converging standards of living, high employment and external equilibrium.
Economic and monetary union would represent the final result of the process of pro-
gressive economic integration in Europe. (Delors, 1989, p. 13)

The Delors Commission was composed of the central bankers of the then 15-country
European Community (soon to become the EU) and their views shaped the process of inte-
gration implemented until now. The first action introduced was the total liberalization of
capital movements, in 1990, giving free rein to finance, following the moves already taken
by the USA and the UK. They understood that this move would threaten the stability of the
European Monetary System—the currency agreement of the time—and argued that, in
order to maintain stable currencies, all sorts of policies—monetary and fiscal policies,
balance of payments measures, wage, and labour protection norms, etc.—had to be subor-
dinated to financial priorities and closely coordinated across countries.
This document effectively summarizes the neoliberal trajectory taken by the European
integration, based on the expansion of finance and on the reliance on free markets for
 150 M. Pianta

goods and capitals for assuring growth (Overbeek, 2012). With such confidence in finance
and markets, the members of the Delors Commission did not imagine that finance would
have caused the crisis of 2008 and the current ‘great recession’.2
The implementation of the bankers’ project was rapidly carried out. On 7 February
1992, European governments signed in Maastricht the Treaty on the EU that opened the
way to the Economic and Monetary Union and the creation of the euro. At the same
time, the Single Market—a much closer trade integration—and the total liberalization
of capital movements were introduced. The Cold War was over, the regimes of Eastern
Europe had collapsed, Germany was re-unified, and neoliberalism and finance were the
polar stars of European integration. Importantly, the retreat of labour ushered in a new
phase dominated by the power of profits and financial rents. Markets were put at the
centre of the European project, relying on their ability to generate growth through
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greater efficiency and investments fuelled by mobile capital. The necessary condition
was to slash inflation and interest rates, stabilize exchange rates, cut public deficit and
debt, so that European economies keen on joining the Monetary Union could be drawn
closer together—in terms of financial ‘fundamentals’. In other words, European govern-
ments were giving up the ‘Keynesian’ policy tools that had supported the highly successful
post-war growth—public expenditure and exchange rate devaluation—counting on the
strength of private demand and exports in a rapidly globalizing economy.
That plan immediately fell into the trap of finance. Six months after the signing of the
Treaty a major crisis led to the exit from the European Monetary System—the currency
agreement of the time—of the British pound, the Italian lira and the Spanish peseta,
with devaluations of up to 30%. Drastic policies were introduced in all countries—cuts
in wages and public expenditure and privatization of public enterprises in order to
balance public budgets and foreign accounts, reduce inflation, and stop speculation
against national currencies. In countries such as Italy such policies inaugurated the most
visible phase of economic decline. In Europe, it was the birth of a Monetary Union
where finance ruled.
Twenty years later, the crisis reveals the failure of the neoliberal project. Europe did not
find an alternative source of demand—exports to the USA and Asia worked for Germany
and few others only. Investment had a modest growth and was mainly directed to financial
activities promising much higher returns than in industry and services. Consumption
stalled, as real wages did not increase and inequality jumped. Public expenditure was—
almost—stopped by the constraints of Europe’s Growth and Stability Pact. As a result,
in the old continent growth has been sluggish—and increasingly uneven—and job creation
far below—in quantity and quality—what was needed.
True, the launch of the euro as a world currency has been a success—the first currency
that is not backed by gold and reserves. True, the EU is the world’s largest economic area.
True, Eurozone countries have remained far from the financial excesses of the USA and
the UK. But the new space for a common European economic policy has not been used.
Half of the action—fiscal policies—was missing. No tax harmonization was introduced.
Even within the EU, there are still tax havens. No public expenditure at the Union
level, that could compensate national cutbacks, is in place. No surprise that growth was
sluggish and uneven. In this process at least ten percentage points of Europe’s GDP
went from wages to profits and financial rents. Europe has become closer to the US
model of financial capitalism, has lost jobs, social rights, and welfare, despite the social
origins of the integration process (Holden, 2012).
 Democracy lost 151

Within Europe, such a model of neoliberal integration disregarded the real economy,
the strong differences across countries in terms of production and export capacities,
technologies, market power of large firms, productivity, employment, wages. Open
and efficient markets were expected to offer growth and jobs to all in the same way,
provided that liberalization was introduced, everywhere. The liberalization of product
markets was the only policy affecting the production system—and ended up destroying
small domestic producers in countries of the periphery. The liberalization of labour
markets forced ‘flexibility’ upon workers and unions—and ended up increasing precar-
ious work and lowering wages. The very idea of industrial policy was blacklisted. Pol-
icies that could guide change in what European countries produced—and how they are
produced—were deemed unviable, inefficient, and dangerous—all this while the diffu-
sion of information and communication technologies and the unsustainable nature of
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our economies were making change all the more important and urgent. Markets—
again—were seen as the only force capable to efficiently drive change in European
economies.
In a context of slow growth, single market and single currency, the strong economies of
Europe grew stronger. German exports, supported by high technology and productivity—
and no more hindered by an appreciating exchange rate—invaded the rest of Europe.
Economic and political power became increasingly concentrated. Germany, France
(barely) and Northern Europe became the economic centre. Southern Europe (Italy
included) and the East were the periphery. The UK placed itself more outside—close to
the US finance-driven model—than inside Europe.

Democracy Lost
This strategy of neoliberal European integration imposed a heavy price on democracy.
Following the ‘technocratic’ model of previous waves of European integration, it relied
on convincing member countries to give up major parts of national sovereignty in econ-
omic matters in exchange for a promise of common economic benefits. The institutional
architecture of integration relied on a proliferation of technocracies—the European
Central Bank, the increased power of the European Commission, more than 30 EU
agencies, from the environment to judicial cooperation—which replaced national power
structures embedded in established practices of democracy, such as parliaments, political
parties, domestic public opinion, civil society, thus reducing the space for democratic
control and contestation.
Steps towards European integration rarely included formal democratic processes at the
European level—such as an enhanced role for the European Parliament—and largely
relied on ‘output legitimacy’ in order to compensate for the democratic deficit resulting
from a skewed institutional architecture (Fioramonti, 2012b; Scharpf, 1999). An attempt
to provide a more solid base for the European construction came with the draft of the Con-
stitutional Treaty that on the one hand reflected the neoliberal inspiration of European inte-
gration and on the other envisaged a more balanced institutional structure. The defeat of
the draft Treaty in the referendums in France and the Netherlands in 2005 brought to an
end that effort, while some institutional changes were included in the Lisbon Treaty. As
a result, democratic processes in Europe became even weaker. This lack of democracy
became a major problem as the crisis of 2008 hit Europe.
 152 M. Pianta

Europe’s Responses to the Crisis

The failure of neoliberal policies and policy-makers to understand and address the current
crisis in Europe and in the USA has been documented by a large literature (Krugman,
2012). European leaders believed crises could not happen, and had to hastily patch
together intervention funds, involving—with no need for it—the International Monetary
Fund. They could not agree on the actions to be taken, divided as they were between
the urge to protect the euro, salvage big banks, and preserve the statute of the European
Central Bank. The latter’s rigid ‘autonomy’ made policy action impossible even when
all governments agreed. European leaders could only agree on imposing austerity on
Athens, Dublin, Lisbon, and Rome, ‘reassuring’ financial markets, saving creditor
banks, increasing countries’ financial burdens and putting public enterprises on the
market at sale prices. However, such policies had the paradoxical consequence of
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making exiting the crisis impossible: Cuts in wages, public expenditure, and consumption
have ended up prolonging the recession, as investments have stopped, tax revenues have
collapsed and servicing foreign debt has become something like a Sisyphus effort.
With no limitation on the operation of finance, the pressure for high financial returns did
not subside. Opportunities for huge speculative gains were identified in attacks on the
public debt of the frailest economies. Yet, such debt was mainly held by large banks of
the European centre, whose assets fell until the rescue assured by the liquidity offered
by the European Central Bank (ECB) in late 2011 and early 2012: about one trillion
EUR provided for three years at the rate of 1%.
The crisis has been made worse by European leaders’ inaction. There is ground to argue
that, if the steps belatedly taken in the summer of 2011—the creation of the European
Financial Stability Facility (EFSF), the buying of government bonds by the European
Central Bank, etc.—had been immediately taken at the start of the Greek crisis in May
2010, the public debt of Monetary Union countries would have been safe from speculation.
Hesitation (mainly due to the reluctance of Germany’s leadership to assume responsibility
and shoulder some of the costs of such reforms) and delays marked the ‘anti-spread’
measures agreed at the European Council of June 2012, leading to further instability as
the recession hit the whole of the EU economy in the second quarter of 2012.
Besides pointing out the policy void, Europe’s crisis raises the question of how
decisions are taken at the EU level, which in turns forces us to focus on the question of
democracy, a longstanding weakness of the European construction. All policy responses
summarized above have led to a reduction of democratic processes. First, the power of
finance and its liberty to carry out speculative attacks against government bonds have
not been restrained by European authorities. Even the long-debated proposal for a financial
transaction tax—now supported by 13 EU countries in the form of ‘enhanced
cooperation’—has yet to be introduced even in its scaled-down version. No other
serious measures for limiting finance have been introduced in Europe. Conversely,
private banks have been repeatedly saved from collapse and protected from increased
regulation and accountability, even when they have been de facto nationalized. Second,
all the institutional arrangements set up by Europe to address the crisis lack any consider-
ation of democratic accountability. Much to the contrary, the independence of the ECB has
not been questioned even when a change in its policy could have solved Europe’s crisis.
The new arrangements—the EFSF and European Mechanism of Stability (EMS)—do not
include any element of democratic decision-making. All emergency measures for troubled
 Democracy lost 153

member states have been imposed by a totally undemocratic ‘troika’ made up of the ECB,
the European Commission and the IMF, with the mandate to negotiate adjustment pro-
grammes regardless of these countries’ social and political conditions. The Fiscal
Compact, which would require the inclusion of a balanced budget in all member states’
constitutions, is the latest and possibly most dangerous attack against democratic pro-
cesses, as it would wipe out an important leverage to support social cohesion while pro-
viding no room for a democratic debate on policy priorities at the European level
(Economistes atterrés, 2012).
Moreover, at the national level, governments of debt-ridden countries have been pushed
to introduce extreme policies against the interests (and demands) of their own citizens. In
these countries, democratic processes have been curtailed by the emergency need to cut
public spending, raise taxes, and pay huge interest rates on debt. When the Greek Prime
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Minister George Papandreou proposed to submit the agreement with the ‘troika’ to a
popular referendum, he was forced to resign. This top-down pressure has shaped and dis-
torted the context for national elections in Portugal, Spain, Greece, as well as the change of
government in Italy in 2011—with a view to ensuring that national leaders (better if they
are technocrats without a direct democratic mandate) follow EU prescriptions.
All these actions were not without alternatives. In the past few years, a continental
debate—uniting voices from a wide range of political organizations, trade unions,
experts’ groups and civil society forces—has pointed them out. Alternatives include: Pro-
tecting weaker European countries from the raids of speculation with extended responsi-
bilities for the European Central Bank; cutting finance down to size with a return to strict
regulation and the adoption of a financial transaction tax (first proposed by European civil
society in the 1980s); a revision of the Growth and Stability Pact and of the Fiscal
Compact, aimed at reversing austerity policies; Union-wide public expenditures, possibly
funded by Eurobonds, targeted to converting European economies to sustainable pro-
duction systems, given that other pressures (including climate change) call for a full
scale reconversion of Europe’s industrial setup; a large redistribution of income and
wealth away from the 10% of richest Europeans, who in the last two decades have
reaped huge benefits from the marketization of society.

The Technocratic Gap and the Rise of Civil Society

From its birth, the EU has been suffering from a deficit of democracy, which has become
even more dramatic since the 2008 economic collapse. With the erosion of national sover-
eignty, representative democracy through national governments and political parties are
increasingly unable to meet citizens’ demands. At the European level, the crisis has
resulted in technocrats exercising power without accountability, while the Parliament
still lacks an adequate role.
National political processes have proved to be unable to address this problem. The
policy debate on Europe’s crisis has been fragmented along national lines, with no EU
government raising the fundamental question of democracy. Political parties have also
failed to pose this question at the European level. Although some initiatives have been
undertaken by the Socialist and Democrats, by the Green and by the United Left groups
in the European Parliament, and by the alliances among national parties, discussing
common elements for alternatives to EU responses to the crisis, none of these efforts
affected the policy debate or had resonance in society at large. Political parties have
 154 M. Pianta

indeed remained prisoners of the domestic political process, framing Europe’s crisis in
terms that reflected deep-seated national views, short-term economic interests and dom-
estic political cultures. The sphere of politics has so far failed to address Europe’s crisis
in ways that are adequate to the scale of the challenge.
Perhaps, a greater ability to develop Europe-wide debates and responses to the crisis
should be expected from civil society. Since the late 1990s, Europe has been agitated
by social mobilizations that have challenged neoliberal globalization and European pol-
icies. Several experiences have emerged of practices of participatory and deliberative
democracy, such as the Social Forums within the context of global justice movements
(Della Porta, 2007, 2009; Smith, 2007; Tarrow, 2005). Such mobilizations have also
been able to affect—to some extent—the political process in major European countries,
leading to (limited) changes in policies on debt cancellation for developing countries,
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trade liberalization, and the financial transaction tax (Utting et al., 2012).
Moreover, since the eruption of the crisis, large mobilizations have taken place in most
EU countries, with the emergence of novel forms of protest and activism—from the indig-
nados in Madrid to the ‘Occupy’ protests in most European capitals. The European per-
spective of such mobilizations, however, has been limited, failing to develop an
appropriate framing for Europe-wide contestation (Pianta & Gerbaudo, 2012). These
mobilizations’ immediate concerns have included the need to resist current austerity pol-
icies (as they are implemented in individual countries) and to reclaim democratic control
over decisions taken by national and European authorities. Such developments have been
conceptualized as a new wave of ‘subterranean politics’ (Kaldor & Selchow, 2012; see
also special section in the Journal of Civil Society, 9(1)) where the national dimension
remained dominant while the struggle for redefining the meaning and practice of democ-
racy took centre stage.
In addition to recent mobilizations, a dense network of organizations has long been
working on European policy issues, including the question of democracy. These include
the Seattle to Brussels network against trade liberalization, the Social Watch network
on social issues, the Climate Action Network Europe on environmental challenges, Euro-
pean Alternatives on EU democracy, as well as lobbying groups such as Finance Watch
and think tanks such as the Transnational Institute and the Corporate Europe Observatory
(Pianta & Marchetti, 2007).
How does one explain then this evident gap between the civic activism and the emer-
gence of alternatives, on the one hand, and the lack of policy agency, on the other
hand? The explanation is probably to be found in the lack of a European political
space. European politics is still missing a ‘visible’ set of power structures and an ‘under-
standable’ institutional setting able to provide a fertile ground for genuinely European
mobilizations. The lack of a European public space as an arena for common discussion
and deliberation on shared problems is a well-known weakness of the European inte-
gration, as the German philosopher Habermas (2004) pointed out. Perhaps an even
more important factor could be the lack of democratic politics at the European level,
which could in theory provide an ‘entry point’ for bottom-up contestation. The EU has
so far remained institutionally elusive and its ‘dispersed’ authority (with power distributed
between the European Council, the Commission, the ECB, etc.) makes it hard for political
and social movements to bring demands to a clearly defined centre of power. The emphasis
on intergovernmental decision-making during the crisis has put national governments
(apparently) at the centre of the European stage, but they found themselves heavily
 Democracy lost 155

constrained by supranational European authority—such as the ‘independent’ ECB—by the

rise of German influence on EU policies and asymmetries in intergovernmental processes,
and by the unchallenged power of finance in key areas.
With no common European ‘demos’ and no ‘site’ of European power, Europe-wide acti-
vism has been limited and has focused on rebuilding civil society connections, shared ana-
lyses, and proposals among experts’ networks: A diagnostic perspective on the
unacceptability of the liberal policies associated with the European crisis, rather than a
prognostic agenda for change. The wide range of mobilizations emerging out of
Europe’s crisis tend to agree on the causes of the economic crisis—the neoliberal policies
which for the last two decades have dominated economic governance at the continental
level. Yet, their framing of ‘what to do’ and ‘how to do it’ appears to be fragmented
along national, ‘thematic’ and ideological lines. European countries have suffered a
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highly uneven impact of the crisis and, while the pressure for social mobilization is
modest in countries of Europe’s centre, conflict is building up in the periphery. Moreover,
different ‘themes’ of contention have driven recent activism. Mobilizations have included
trade union’s struggles against job losses, social resistance to welfare cuts, youth and
student outrage against tuition fees, precarious working conditions and, overall, the lack
of an acceptable future, as well as conventional protests against governmental policies
organized by opposition political parties, coupled with new forms of resistance epitomized
by the indignados and Occupy movements.
It must be noted that an ideological divide—on both economic and political grounds—is
also present in all these mobilizations. While trade unions and social democratic parties
call for the introduction of mere ‘adjustments’ to current EU policies, the more radical
movements demand a drastic change in what they view as a socially, environmentally,
and politically unsustainable model of governance. Political views about the future of
Europe remain divided between those who support greater EU political integration (in
line with the federalist ideal), and those who emphasize the role of national political pro-
cesses and the need to maintain a degree of sovereignty (Fioramonti, 2012b).
Such a huge fragmentation has prevented a common framing of contention on Europe’s
crisis to emerge as a starting point for a new wave of continental activism. Inevitably,
different approaches to Europe’s crisis have developed and a common discussion on
how an alternative could be achieved through political processes—at the European and
national levels—has barely started. Notwithstanding these hurdles, Europe-wide activism
is picking up speed. A number of pan-European protest events have indeed taken place in
the last couple of years, with the most remarkable ones being the Global Change protest on
15 October 2011, the Blockupy Frankfurt protest on 12 May 2011, the Florence 10+10
Forum on 8 – 10 November 2012, the European strike/day of action called by the European
Trade Union Council on 14 November 2012 and the European mobilizations against the
Spring meeting of the European Council at the end of March 2013 (Pianta & Gerbaudo,
2012). Will this new wave lead to a more dynamic role for civil society in re-designing
the future of Europe?

Building a Europe-Wide ‘Counter Narrative’

The quest for a common civil society response to Europe’s crisis and for the creation of a
genuine European political space is now at the centre of important streams of activism in
Europe. A number of recent contributions by intellectuals, think thanks, and civil society
 156 M. Pianta

groups focus on the need to build a ‘counter narrative’ with respect to the future of Europe
and the democratic response to the crisis, as opposed to the neoliberal recipes being
adopted by Brussels.
Since 1995, the Euromemorandum group (a gathering of progressive economists) has
been making calls to rethink the EU’s approach to economic policy. The 2012 edition
of the Euromemorandum, backed by a large number of European economists, has
called for limiting the freedom of action of the financial sector, enhancing the role of
the European Central Bank as lender of last resort, replacing austerity with policies of
increasing public demand, wage support, full employment, and shorter working hours
(Euromemorandum, 2012). The European Trade Union Confederation (ETUC) has repeat-
edly denounced the effects of the crisis and the austerity policies imposed on Europe, orga-
nizing a series of protests that culminated with the Europe-wide strike/day of protest of 14
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November 2012 mentioned above. In the ETUC conference of May 2011 in Athens, the
final document criticized the spiral between debt, austerity, and unemployment, arguing
that unilateral austerity plans would lead to the collapse of the Eurozone.3
In France, the Manifesto of Appalled Economists (Manifeste des economistes atterrés)
published in 2011 soon became a bestseller (Economistes atterrés, 2011). This manifesto
dismantles the ‘false certainties’ of the virtuous functioning of markets and proposes
severe restrictions on the financial activities that brought speculation and crisis. In a
second book, the same economists denounced the Fiscal Compact requiring balanced
budgets and the reimbursement of the public debt in excess of 60% of GDP, which is con-
sidered a recipe for a depression (Economistes atterrés, 2012). A book by French econom-
ist Michel Aglietta suggests that only a federal Europe can make the euro a sovereign
currency and end the crisis. He calls for making the ECB a lender of last resort, integrating
fiscal policy at European level, issuing Eurobonds, narrowing the gap between the pro-
duction capacity of the European ‘centre’ and the ‘periphery’ (Aglietta, 2012).
In Germany, a thorough analysis of the mechanisms of the crisis and the missteps of
European policy was set out by 100 academic advisors to ATTAC Germany, the
German affiliate of the international network that for years now has been advocating for
the taxation of the financial industry and the abandonment of free-market policies. They
denounced the spread of the crisis from private banks to sovereign debt, pointed to the
risk of a crisis of hegemony that could bring new conflicts, and called for an end to the
logic of growth, for managed default to reduce the debt, and for the taxation of capital
assets and finance.4
Even before the outbreak of the sovereign debt crisis, a volume published by the Euro-
pean Trade Union Institute (ETUI; Watt & Botsch, 2010) brought together the ideas of 40
American, European, and Italian economists on themes ranging from the tax on financial
transactions to policies to stimulate demand, from controls on capital movements to pro-
tection for labour rights and wages. The Institute’s follow-up volume continues the discus-
sion with a preface by the Nobel Prize winner Joseph Stiglitz and contributions from 30
economists (Coats, 2011). The ETUI’s initiatives were presented at a range of public
events in Europe, including ‘Beyond the crisis: developing sustainable alternatives’, a con-
ference organized at the European Parliament by the Socialist, Democratic, and Green
MPs, held on 9 February 2012. The discussion has been an encounter between economists,
unionists, and politicians of various extraction on how to deal with the crisis, reduce
inequality, change our model of growth and develop the green economy. A common cri-
tique emerged on the rules of European economic governance and the ‘fiscal compact’
 Democracy lost 157

adopted by the euro-area governments in December 2011, two issues on which the parlia-
mentary groups of Socialists and Democrats, Greens, and European Left (GUE-NGL)
were united in opposing the decisions of the Council and Commission. However, in
spite of widespread criticism, at the spring summit of the European Council, governments
made the Fiscal Compact the newest Treaty of the EU.
The attack on the disastrous effects of the European policy of austerity—budget balance
written into constitutions, repayment of a portion of the public debt, and so on—is devel-
oped further in a volume by Hoang Ngoc (2011), a French Socialist euro-MP and an econ-
omics professor at the Sorbonne. The proposals include a different role for the ECB,
Eurobonds, a public investment programme, the tax on financial transactions, and Euro-
pean harmonization of corporate taxes.
In Italy, Europe’s crisis has been at the centre of a debate on ‘Europe’s course’, started
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by the civil society campaign Sbilanciamoci! (the contributions of over 50 economists and
politicians are in Rossanda & Pianta, 2012); in Europe the debate was hosted by open-
Democracy (www.opendemocracy.net/can-europe-make-it) and other European groups.
A Forum on ‘The way out’ of Europe’s crisis was attended by 800 people in Florence
on 9 December 2011, where the idea of a European appeal was first discussed. The
Appeal ‘Another Road for Europe’ was then launched in May 2012 by a large number
of European intellectuals and activists. The Appeal argued that:

Europe is in crisis because it has been hijacked by neoliberalism and finance. In the
last twenty years—with a persistent democratic deficit—the meaning of the Euro-
pean Union has increasingly been reduced to a narrow view of the single market
and the single currency, leading to liberalizations and speculative bubbles, loss of
rights and the explosion of inequalities. This is not the Europe that was imagined
decades ago as a space of economic and political integration free from war. This
is not the Europe that was built through economic and social progress, the extension
of democracy and welfare rights.5

Accusing European authorities and governments of having saved finance and imposed
harsh austerity on people, the Appeal argued that ‘Another Europe is possible’ and that
‘This other Europe is not a new superstate nor is it another intergovernmental bureaucracy.
A form of democratic governance for Europe is needed if we are to address the global chal-
lenges that nation-states are not able to manage’. It called for weaving into a common fra-
mework ‘visions of change, protest, and alternatives’ focusing on six objectives,
including: A smaller finance; more integrated economic policies; more jobs and labour
rights, less inequality; protecting the environment; practising democracy; making peace
and upholding human rights. The demands on democracy argued that:

The forms of representative democracy through parties and governments—and the

social dialogue among organizations representing capital and labour—are less and
less able to provide answers to current problems. At European level the common
decision-making process is increasingly replaced by the rule of the strongest. [. . .]
In past decades, Europe’s citizens have taken centre stage in social mobilizations
and in practices of participatory and deliberative democracy—from European
Social Forums to the protests of indignados. These experiences need an institutional
 158 M. Pianta

response. There is the need to overcome the mismatch between social change and
political and institutional arrangements that are a remnant of the past.

The Appeal called for a debate on these issues at the European Parliament, which was held
on 28 June 2012 at the same time as the European Council meeting. The Forum ‘Another
Road for Europe’ saw many of the signatories discuss the alternatives to Europe’s crisis
with civil society networks, trade unions, and MEPs from the Socialist and Democrats,
Green and United Left groups in the European Parliament, as well as with national poli-
ticians.6 The demands that emerged there were common to a number of other policy docu-
ments produced by civil society and political initiatives, including the ‘Common Call for
Another Economic Policy for Europe’ by the European Progressive Economists Network
that was launched, at the Florence 10+10 meeting in November 2012.
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Conclusion: Reclaiming Democracy in Times of Crisis

The debate on the limits of European democracy has intensified as a result of the crisis.
Habermas et al. (2012) have recently written that Europe is only a pretence of democracy,
left in the power of financial markets, arguing that the way out is a political integration that
could fulfil the promise of the European social model and give Europe greater global influ-
ence. In a reply, Balibar (2012) has argued that the design of European institutions has
long excluded and neutralized democracy and the technocratic approach to the crisis
has prevented citizens from playing any role. Therefore, he concludes, a new political
Europe should be more democratic than its member states, integrating forms of represen-
tative and participatory democracy. Building on these arguments, some have maintained
that the current crisis poses a great opportunity for the ‘politicization’ of the European
arena and move towards an EU 2.0, in which civil society groups contribute to the parti-
cipatory transformation of European governance. As popular discontent with the outcome
of EU policies grows, citizens are becoming aware that there are winners and losers in the
process of European integration and that, for as long as a proactive demos is absent, then
the ‘people’ will always be on the receiving end of top-down technocracy (Fioramonti,
2012a).
On the question of reclaiming democracy, however, additional questions should be con-
sidered. This essay has pointed out the division between the perspective of a closer politi-
cal union and the defence of national sovereignty, a division that is also present within
civil society groups that often reflect national political cultures. French and UK views,
for instance, tend to emphasize the role of states. German, Italian, and Spanish approaches,
by contrast, are more open to a federalist model for Europe. The lack of a common per-
spective on European politics means that proposals for greater democracy are often
divided between these two views, with a variety of shades of grey.
Against this backdrop, a number of specific proposals for making the European political
process more democratic have emerged in recent years, including calls for a more power-
ful European Parliament, for accountability and transparency in the European Council, for
a direct election of the Commission, for a more systematic use of the new tool of European
Citizens’ Initiatives to petition European authorities, and suggestions that civil society
groups could launch a Europe-wide platform with policy demands to the political forces
running in the next elections of the European Parliament in 2014. In addition to that,
civil society groups with federalist inclinations have proposed a ‘Citizen Pact’, putting
 Democracy lost 159

people first in Europe’s policy agenda, and the idea of a Constitutional Convention with a
strong bottom-up process.
A more fundamental question, however, concerns the view of democracy itself and the
relevance of political processes. European civil society has long organized cross-border
mobilizations, involving trade unions and political forces, in order to build consensus
among public opinion and challenge governments and political authorities to change unde-
sired and unjust policies (Utting et al., 2012). In doing so, it has often combined protest,
lobbying, and proposal of alternatives. These activities rely on the recognition of politics
as the space for the possibility of change, on the understanding that political agency by
existing institutions is an effective tool for implementing change, and on the relative ‘open-
ness’ of the (domestic and European) political process to pressure from below. These pre-
conditions have long been taken for granted in the context of liberal democracies. Yet, now
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they are endangered by a variety of factors. First, the European political process is struc-
tured in a way that leaves little scope for activists’ voices. The technocratic structure of
EU institutions and the weak role of the European Parliament mean that decision-making
is much less open to civil society and is often hijacked by legions of Brussels-based lobby-
ists. Second, the ability of policy-makers to effectively introduce change through political
agency is increasingly questioned, especially when (global) financial and economic activi-
ties are concerned. For example, the difficulty in implementing the financial transaction tax
(despite repeated declarations by country officials) is due not only to the global scale of
financial markets, but also to the regulatory capture exercised by a few influential stake-
holders within the financial industry. Finally, new generations of activists—such as the
indignados and the Occupy movement—do not necessarily share anymore the view that
politics—with all its necessary mediations—is the space for achieving change. Their
forms of action—encampments, street protest, media events, etc.—try to establish a
direct relationship between participating individuals and the power that is contested. Some-
times, no specific demands are put forward and established political forces (including the
traditional left) are viewed with suspicion and held in contempt. Collective identities and
forms of mass organization are taking a backseat while priority is given to individual iden-
tities, direct participation in local events and personal contribution to decision-making
within small activists’ groups (Kaldor & Selchow, 2012).
The combined effect of these factors is that the prospects for reclaiming democracy in
the aftermath of Europe’s crisis remain uncertain. While a progressive convergence among
mobilizations can be identified on the demands concerning economic policies, no such
convergence is found in the demand for reclaiming democracy. Europe’s civil society
has still a long way to go before sharing a common understanding of what demands for
greater democracy in Europe effectively mean.

Notes
1. Critiques of neoliberal capitalism are in Klein (2008), Harvey (2010), and Chang (2010); the current crisis
is examined in Krugman (2012). Polanyi (2001) provides a classic account of how liberalism a century
ago extended its power over society, leading to the Great Depression and to major threats to democracy.
2. To read more about the relationship between European integration and crises, see Fioramonti (2012b),
Anderson (2009), and Eichengreen (2008). More detailed analyses of Europe’s crisis can be found in
Aglietta (2012), Pianta (2012), and Rossanda and Pianta (2012). The rise of finance is discussed by
Arrighi (1994) and Arrighi and Silver (2011); see also Chesnais (2004) and Economistes Atterrés (2011).
 160 M. Pianta

3. ETUC, Emergency Resolution 16/5/2011, ETUC Congress urges the Economic and Financial Affairs
Council to change its political course immediately (http://www.etuc.org/IMG/pdf/2011-05-16_Draft_
Emergency_Resolution_Greece_ECOFIN-doc_1_.pdf).
4. Scientific Advisory Board of ATTAC Germany, Controlling the financial markets instead of crushing the
population of debtor nations, Policy Paper 4/2011, Rosa Luxembourg Foundation, http://www.rosalux.de/
publication/37932//controlling-the-financial-markets-instead-of-crushing-the-population-of-debtor-natio
ns.html.
5. The Appeal and the list of supporters is available at www.anotherroadforeurope.org/index.php/en/appeal.
6. A final document was prepared—‘Five Proposals for Another Road for Europe. An alternative to Euro-
pean Council decisions’—summarizing the main demands for addressing Europe’s crisis, including a new
role of the European Central Bank, a common responsibility for public debt, a downsizing of finance, a
reversal of austerity policies, a ‘green new deal’ and an expansion of democracy (www.
anotherroadforeurope.org/index.php/en/forum-28-june-12).
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