Market Discipline and the Constitution

This paper argues that the constitutional identity of Europe has come to be imbued by the constant threat of violence inherent in the idea and practice of market discipline. Central to this configuration is the absence of a European transfer union that would redistribute wealth from richer to poorer states. A notable feature of the constitutional architecture of Europe, and of the EMU in particular, is that Member States enter into negotiations with markets individually rather than on the basis of a common European bond. In turn, the market is free to coerce states into fiscal discipline against the background of a constant threat of increase in interest rates. Implicit, therefore, in this architecture is the Union’s handing over to the markets the power to exert violence upon individual Member States. This paper asserts that the violence of market discipline has become an integral, structural component of the European constitution and examines the significance of this development.