Banking Union in Europe: Problem of democratic deficit

Abstract

The establishment of the Banking Union includes the transfer of decision-making authority in supervision and bank resolution in integrated Europe to the supranational level. Specific tasks in supervising European credit institutions are assigned to the European Central Bank. It seems appropriate to pose a question whether such an expansion can lead to the aggravation of the democracy deficit, inherent in the political system of the European Union. Democratic deficit can be provoked by putting too much emphasis on executive powers of non-majoritarian institutions, including the ECB. In order to analyze the growing role of the ECB in the institutional context of the construction of the Banking Union, the author applies the concepts of input and output legitimacy, as well as throughout legitimacy. The article explores the origins of the institutional design of the Banking Union. Its limitations emerge as a result of mutual concessions and compromises among EU member-states, as well as the impossibility of a more coherent reform, which demands changes to the Treaty. The Paper also deals with the democracy deficit and legitimacy notions in their application to the political system of the EU in general and the attachments of the banking supervision functions to the ECB in particular. In the third part of the article, the institutional-organizational analysis is employed to analyze the relationship between the ECB’s independence, its de facto expanded mandate and the mechanism of its accountability. The author comes to a conclusion that excessive expectations of the European ruling class of what can be achieved with the help of non-majoritarian institutions (in this case - of the ECB) is a challenge for the survival of the EU in case of further systemic crises. The results of the implemented research are useful for conducting a conceptual foresight of the EU.