INTERNATIONAL POLICY ANALYSIS Democratic Requirements for a European Economic Government Stefan Collignon December 2010 n The euro crisis has revealed the need for a fundamental reform of the Euro area’s economic governance. The logic of a common currency requires that macroeco­nomic policymaking be centralised at the EU level; otherwise, member state govern­ments will always undermine the common good by pursuing partial interests. n Centralising policymaking at the European level poses the problem of legitimacy. At the core of Europe’s governance is a problem of democracy. The reforms pro­posed by the Commission, the Van Rompuy Task Force and the Franco-German initiatives are bureaucratic and undemocratic. They will not prevent future crises. n The alternative is to turn the European Commission into a European Economic Government, democratically controlled by the Council and the European Parliament (EP). The instrument for conducting macroeconomic policies at the European level is the newly-created»ordinary legislative process« in the Lisbon Treaty, which grounds European secondary legislation in a co-decision process between Com­mission, Council and European Parliament. A proposal has been made concerning how the Stability and Growth Pact could operate under such a democratic economic government.