Rodrick or Madison? Conceptualizing the Eurozone’s Governance after the Crisis

The post-2008 euro crisis has dramatically transformed the governance of the Eurozone. Under the pressure of the crisis, the EMU has been transformed in an organization increasingly controlled by national governments. However, the intergovernmental method, when facing crises with distributive effects, has shown to suffer from weak effectiveness and doubts about its legitimacy. When an agreement between national governments is unreachable, as has been the case with the third pillar of the banking union for instance, then vital and urgent policy processes end in stalemate. The combination between a crisis with distributive effects and the lack of trust between national governments has led to a process of growing regulatory centralization of the Eurozone’s governance. For interpreting this institutional evolution and its implications, two paradigms can be utilized. The first derived from the Rodrik’s trilemma, the second from the Madison’s dilemma. Rodrik’s trilemma states that it is impossible to simultaneously maximize international political integration, national sovereignty, and democratic control. Solving the trilemma in the EU requires choosing a combination of non-100% doses of the three elements. A higher level of one of them requires a lower level of one or both of the others – it is a zero-sum exercise. Following Rodrick, deeper integration of the Eurozone has necessarily implied less national sovereignty and weaker democratic control at the national level. The adoption of a European minister of finance would, for instance, imply a further loss of national sovereignty in exchange for better coordination in the event of financial crises. Trade-offs between risk sharing and risk reduction might also be explained by the logic of solving the trilemma. The paper will argue that the evolution of the Eurozone’s governance towards regulatory centralization without political democratization fits the solution of the Rodrick’s trilemma. However, a different paradigm might be used for interpreting the institutional evolution of the Eurozone, a paradigm based on Madison’s dilemma, which concerns the distribution of power and competences between two distinct and separate sovereign entities – the national and supranational organizations. The analytical framework derived from this paradigm does not imply a zero-sum redistribution of doses of the same sovereignty on different institutional settings. This approach has an explicit anti-centralizing bias because it fragments sovereignty between distinct institutional entities, rather than transferring a chosen amount of general sovereignty from one level (the member state) to a higher. On the basis of this conceptual distinction, the paper will argue that the transformation of the Eurozone’s governance has gone in the Rodrick direction, rather than Madison’s direction. The EMU has become a policy regime with statist features but without democratic legitimacy which feed a permanent instability. Is it possible to disentangle EMU from the Rodrick’s paradigm and moving it towards Madison’s interpretation of a union of states?