Economists, lawyers and the EU’s new fiscal rules: A dialogue with Professor Mark Dawson

The legislative journey to amend the EU’s fiscal framework has commenced. Following the Commission's proposal release on 26 April, legislators from both the Council and Parliament are now working to forge an agreement by year-end. Mark Dawson, Professor of EU Law at the Hertie School of Governance in Berlin, stands among the select legal scholars who have ventured into this discourse, a realm predominantly navigated by economists. We engaged in a discussion with him regarding the role of legal expertise in EMU matters and the consequences of lawyers being sidelined from this debate.

Professor Dawson, having authored a report on the ongoing reform of the Stability and Growth Pact, you stand as one of the rare legal scholars addressing this issue. Why are your legal peers so silent on this matter?

Legal scholars tend to focus on those areas where there are more rules and where there's more case law. When it comes to the Economic and Monetary Union (EMU), you will find many academic articles on the mandate of the ECB, for instance. This is related to the fact that the treaties legalize, and thus judicialize, the mandate of the ECB. It also reflects the large amount of case law resulting from the judicial clash between the Court of Justice of the EU and the German Constitutional Court. On the other hand, regarding fiscal topics, there’s a lot less: treaty provisions are very vague and there is no case law. So, we are only a small group of scholars working on this.

So, in the academic sphere, you are somewhat isolated. But in the EU institutions, where are legal experts?

Legal experts are very influential in EU decision-making, but this is probably less true in this field. If you look at the Commission’s DG Justice and Consumers, for instance, you will find plenty of lawyers. In the DGs that are responsible for negotiating fiscal rules, on the other hand, they don’t have this background and are therefore less receptive to and have less understanding of a certain number of (legal) questions.

This leads us to the core issue of this discussion. You are saying that when legal scholars scrutinize a reform such as the ongoing one, they delve into a set of questions distinct from those tackled by economists. What are these questions?

When dealing with a reform like that of the EU fiscal framework, legal scholars would typically analyse whether the new rules are consistent with some of the general principles that underlie the EU’s legal order. One of these is the democratic principle, and one could argue that this principle is undermined by the current proposal since it weakens national processes of parliamentary accountability without compensating at the EU level. Another question concerns the equality of member states. With this new reform, fiscal rules are bilaterally negotiated between member states and the Commission. That’s a problem because more powerful member states will have more leverage than weaker ones. A third question that legal scholars will explore is whether these new rules reflect the overall treaty objectives. The treaties have not only a price stability objective, but also include social and environmental objectives. A legal analysis of this reform would therefore examine whether there is an adequate balance between these objectives. These three elements are strongly embedded in the treaties and my argument is that they are not sufficiently embedded in the new reform package.

Do you fear that all these questions could be excluded from the debate on the reformed EU fiscal rules if legal experts do not make their voices heard?

I don’t know this as an empirical fact, but look at the way in which the European semester has worked in the last ten years. Do you really think it produced good sustainable social and environmental outcomes? Now, most of the envisaged changes and amendments to this new reform package try to address concerns of member states that fiscal rules are not tight enough. They don’t improve the democratic legitimacy of the mechanism. And the way the discussion is developing reflects an imbalance of voices. There are lots of voices that reflect the economic perspective and not many voices on the other side. Think about the expertise that goes into producing policy proposals in this area. Institutions often produce reports in the course of the policy-making process. Who are they asking? That impacts the type of information that MEPs are hearing, the discussions in the Council etc…

What distinct roles should lawyers and economists play in this debate?

Lawyers tend to think that they’re primus inter pares. They are the ones who understand the rules. The truth though is that the EMU chapters of the treaties give a lot of discretion to the institutions, even to define their mandate. So it’s not like lawyers set the framework and economists then develop their work within this framework. It’s more a co-determined framework. Lawyers have to discuss the boundaries of the rules and they have to discuss how the EMU rules interact with other rules in the treaties and the jurisprudence of the Court. But still, economic expertise is needed to understand how these rules can actually work, how they can be implemented… I don't see a hierarchical relationship but a collaborative one between the two disciplines."

Where do we head from here?

The short-term goal for the union movement, for example, is to apply pressure to change the package. On the long term though, we must try to change the way in which policymaking works in this area; change the type of voice involved in the policymaking process so that you can produce better, more balanced policy outcomes in the end. Social voices are too late in the game, they should enter earlier in the conversation. They need to be producing the ideas. This is part of the long game.

Professor Dawson, we thank you very much for this discussion.

(Interview conducted and edited by Sergio De la Parra)