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BBC News - August 27, 2012

by Michael Goldfarb

European leaders who think closer integration will fix the euro crisis rarely use the word "federalism", but why not, if that is what they mean? Is this form of political alliance really so embarrassing?

August is becoming Groundhog Month. Just like last August and the one before that, the eurozone crisis has been ruining the holiday plans of Europe's leaders. Greece is asking for more time to pay off its debts and the bond markets are in attack mode.

But between last August and this one, a new wrinkle has appeared in the story. A long-term solution to the crisis is being theorised - a more closely integrated Europe.

German Chancellor Angela Merkel has been pounding home the idea in speeches for months. "We need to further develop the European Union's structure - that does not mean less Europe, that means more Europe," she told a conference of her Christian Democratic Party late last year.

Germany's representative on the board of the European Central Bank, Joerg Asmussen, has gone further, calling for the "sharing of national sovereignty" over the critical areas of tax and budgets, and a parliament with real power to oversee these things.

What Merkel and Asmussen mean, but for some reason step back from saying, is that the way to save the euro is to create a federal Europe.

Former British Prime Minister Margaret Thatcher presciently understood that was the only way to make the euro work. In October 1990 she told Parliament "economic and monetary union is really the backdoor to a federal Europe and we totally and utterly reject that".

But whatever people think of the idea of a federal Europe, there is an awful lot of federalism about - in Europe and elsewhere. Germany is a federal republic, after all, and federalism has a long and rather glorious history - particularly in the Anglo-Saxon world.

John Locke first used the term theoretically in 1690 in the Two Treatises of Government, to describe how governments enter into alliances with one another. The great political philosopher called it "federative" power. Although, Locke writes, he doesn't really care what term is used to describe the process.

A decade and a half later, the theory had a real-world application. A political union between England and Scotland was being negotiated to provide a Protestant bulwark against Catholic France. In 1706 Scottish and English negotiators reached an agreement on unifying the island of Britain into a single state and it was up to the Scottish and English Parliaments to ratify Acts of Union.

Many in Scotland did not want to give up their sovereignty. So Queen Anne, the monarch of both countries, wrote the Scottish Parliament a letter.

"An entire and perfect union will be the solid foundation of lasting peace: It will secure your religion, liberty, and property; remove the animosities amongst yourselves, and the jealousies and differences betwixt our two kingdoms. It must increase your strength, riches, and trade; and by this union the whole island, being joined in affection and free from all apprehensions of different interest, will be enabled to resist all its enemies."

The Acts of Union were passed in 1707 and they provide a template for what federalism means in practice - people give up authority over some things and keep control over others.

The Act of Union secured the Hanoverian succession, there would be no Stuart return to the English throne. So the Scots - or, the Scottish leadership - gave up something. But they got some things back: Scottish business interests were compensated for losses in the New World and given open access to trade in English colonies. The Scots kept their own legal and educational systems because… the English really didn't care.

t's an arrangement that has worked pretty well, up to the present moment. We'll see how well it still works in 2014 when a promised referendum on Scottish independence takes place.

Exactly 80 years after the Act of Union, 13 of Britain's former colonies in North America were facing big problems and trying to figure out how, in the words of Queen Anne, to form a more "perfect union".

"The United States, whatever it was, was bankrupt," says Pauline Maier, Kenan Professor of History at the Massachusetts Institute of Technology. "This was of great concern to George Washington because, as he said, the United States was not a respectable nation, because a respectable nation paid its debts."

The problem among the 13 newly independent entities was not a million miles from the problem facing the 17 countries of the eurozone - how much sovereignty should they give up to a central government? When the Revolutionary War ended in 1781, the states operated under an agreement called the Articles of Confederation and Perpetual Union. This clearly wasn't working so in 1787, a new constitutional convention was called.

It was, in Maier's view, taken over by federalists, who pushed through a more centralising constitution than most might have wanted.

The ratification process was fraught. In order to persuade the people of New York to approve the document, Alexander Hamilton, James Madison and John Jay wrote a series of newspaper editorials making the case for a more federal arrangement of the 13.

In another foreshadowing of the current situation in the eurozone, they especially argued for centralising the country's financial apparatus and giving oversight of it to the national congress rather than individual state legislatures.

These editorials are called the Federalist Papers and remain set texts in American universities.

There are Anti-Federalist papers, as well. However, history is written by the winners and so they are much less well-known.

Growing up in America, when it came time to learn about the Constitution it was almost as if a choir of angels was humming in the background as we learned about Hamilton and Madison. The Constitution is holy writ to many in the US, which is why the arguments about it today are so vehement.

But in essence it defines a form of federalism that worked at that moment. The authors of the Federalist Papers knew that historical circumstances change and argued that only time would correct the mistakes contained in the Constitution.

Federalism is not a dogma, like Marxism. It is a form of governance in which states give up something to gain greater security in the future. It is flexibility in the face of human fallibility.

You will know the leaders of Europe are taking serious steps towards resolving the crisis long-term when they start using the F-word openly - making the arguments for and against a more "federal" Europe, in terms European citizens can understand.

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