I. The Post-World War II European Democratic and Social Constitutional State

The image of the prevailingly open constitution acquires more definite contours by examining the structure of Democratic and Social Constitutional State (DSCS), the constitutional order predominant in Europe in the aftermath of World War II. ^{Footnote 28} The constitutions approved in this period were documents symbolizing a new beginning, and they were also one of several tools employed to restore political consensus on state governing structures and foster social integration. ^{Footnote 29} This was particularly evident in countries like France, Italy, and Germany, where the newly enacted constitutions reflected a drastic realignment of political parties, with the two dominant forces—Christian Democracy and the parties of the Left—assuming the role of predominant constitutional subjects.

Aware of their profoundly different aspirations, interests and policy agendas, those political parties learned quickly that constitutional politics were no longer the terrain for political struggles aimed at imposing a particular political agenda on the society. In other words, constitutions ceased to be instruments of government of the predominant social classes ^{Footnote 30} and turned into pacts ^{Footnote 31} stating the basic terms for peaceful coexistence. ^{Footnote 32} To write these type of constitutions, ordinary political disagreements had to be bracketed and efforts were directed towards choices of constitutional design commanding broad support in both the political system and the country at large. This ethos of mutual recognition and compromise shaped post-World War II constitutional politics: Constituent subjects strove to agree if not on a fundamental ideology, at least on a set of substantive commitments and institutions contributing to social cohesion and enabling democratic political competition. ^{Footnote 33}

Constitutional politics played out in a consensual mode ^{Footnote 34} by political parties harboring conflicting political aspirations resulted in prevailingly open constitutions. ^{Footnote 35} Their openness was visible in their aspiration to govern the social question through democratic means. ^{Footnote 36} This capacity to legitimate and contain conflicts, and to transform them from factors of disintegration into potential civic resources was created first of all by agreeing on a set of procedures and institutions establishing a relatively even-handed framework for the acting out of political and socio-economic conflicts.

The emerging constitutional culture, however, was by no means satisfied with a shared procedural framework enabling political competition. Open constitutions were not neutral constitutions; ^{Footnote 37} that is, they could not admit whatever political development resulting from majority rule. ^{Footnote 38} A meaningful democratic competition presupposed the respect of a set of requirements concerning the enhancement of the persons and their equal participation to collective goods. Thus, to establish their authority, the constitutions ought to also include a range of substantive normative commitments. ^{Footnote 39} The development of a substantive dimension in the constitution was not entirely original; ^{Footnote 40} yet, in the context of entrenched constitutions, it entailed another profound modification of their role. The constitution was no longer a loi politique restricted at the definition of the fundamental norms of the institutional architecture; it extended its remit to a broader range of social and economic fields in an attempt to shape areas previously left to the discretion of legislatures or the unbound decision of private actors. ^{Footnote 41}

The constitution, therefore, expressed also a set of purposive fundamental norms ^{Footnote 42} penetrating all the social relations situated within the state domain, ^{Footnote 43} and exerting their effects primarily through the activity of legislatures and constitutional adjudicators. ^{Footnote 44} However, their transformative aspirations were not superimposed on society; to the contrary, their pursuit was viewed as an eminently political undertaking, attainable through legislative activity in a context of democratic competition. In other words, the transformative goals of the DSCS were exposed to and not shielded from political conflict. ^{Footnote 45}

Ironically, the first to realize this notion were probably the Italian Communists. Already in the 1930s they had conceived the idea of “progressive democracy,” according to which socialism had to be attained by expanding political participation and, therefore, through democratic means. ^{Footnote 46} As a consequence, at the Constituent Assembly the Communist Party concurred with the idea that the constitution was not to favor or entrench any type of ideology. ^{Footnote 47} The defeat of capitalism and the socialist transformation of society were goals to be achieved essentially through mass mobilization and democratic political action. Accordingly, the Communists fought strategically to strengthen civil, political, and collective rights in order to create space and resources for social and political activism. They struggled to insert in the constitution language evoking social transformation and to predispose the tools of activist government—all textual elements which, in favorable political circumstances, could be invoked to legitimate their political agenda. Yet, the definition of political economy was left to legislative rather than constitutional determination. ^{Footnote 48}

If no one could elevate his particular convictions and policy solutions to the status of dogma, ^{Footnote 49} in principle all political opinions deserved to have access to the constitutional arena and be treated with equal respect. ^{Footnote 50} Besides inspiring the design of political institutions, this concept was promptly acknowledged in the interpretation of constitutional texts. In 1954, for instance, the German Constitutional Court was adamant in declaring that the Basic Law did not ordain the nature and structure of the economic system, but only laid down a more open framework of core protections and principles. ^{Footnote 51} Likewise, the Italian Constitutional Court refrained from constraining legislative activity on the basis of the more or less biased reconstructions of the economic constitutional order resulting from unilateral interpretations of constitutional principles. ^{Footnote 52} National constitutions did not subscribe to any exclusive and predefined economic theory and remained open to alternative legislative renderings of their constitutional commitments. To be sure, the most extreme versions of collectivism and laissez-faire were discarded as contrary to basic constitutional rights but, besides that, broad room was left to political freedom and a great deal of discretion was recognized to legislatures on the actual use of a wide range of policy instruments. ^{Footnote 53} To put it in a single line: The open constitution lent itself to a variety of economic material orders. ^{Footnote 54}

The idea that constitution-makers had omitted to entrench a particular economic constitutional order fueled heated scholarly debates. ^{Footnote 55} Among the ranks of those keen on rehabilitating a thicker and more purposive constitutional order in this field, ordoliberal scholars were probably the most vocal. In their view, the organization of the economic system ought to conform to principles of economic rationality, on the assumption of the existence of a general political decision on the structure of national economic life. ^{Footnote 56} Short of any constitutional constraints, national economic policies would be prey of particular interests ^{Footnote 57} and become irrational. ^{Footnote 58} To prevent government from being captured, a set of clear and general rules was required so that competition could perform its social function of contrasting the concentration of private power. ^{Footnote 59}

To be sure, the ordoliberal understanding of the constitutional order did not necessarily entail a society entirely subject to overriding and holistic market principles. ^{Footnote 60} Ordoliberals had in mind a more modest conception of the economic order, in which economic freedom and competition did not exert any authority outside the economic sphere, ^{Footnote 61} and their protection was instrumental to a more comprehensive notion of social welfare. ^{Footnote 62} At any rate, at least for a few decades, constitutional adjudicators and the majority of constitutional scholars seemed to resist their more or less tempting suggestions. Even when Soziale Marktwirtschaft consolidated its predominance on German political economy, the constitutional court averted its entrenchment. ^{Footnote 63} As much as most of the ruling class subscribed to that political agenda, that remained only one of the legitimate manifestations of the economic constitutional order. Alternative options were available, and the constitutional court did not foreclose their legislative pursuit. ^{Footnote 64}

The wide scope for policy-making available in the DSCS can be appreciated by looking at the material economic orders developed during les trente glorieuses. ^{Footnote 65} The DSCS expanded and stabilized government activism as a defining feature of the constitutional order. State interventionism was regarded not only as instrumental to the reconstruction and modernization of state economies, but also as contributing to the consolidation of national unity and cohesion. ^{Footnote 66} Broad was the perception that private economy was chronically unstable and liable to prolonged stagnation at unnecessarily high levels of unemployment. Thus, regular rather than exceptional state action was necessary to govern the fluctuations of private economy and restore economic growth and full employment. ^{Footnote 67}

Following the United States’ lead, ^{Footnote 68} in several European countries the promotion of employment and the modernization of the economy became the focal points of all political economy, ^{Footnote 69} even at the cost of potentially negative repercussions on price stability. ^{Footnote 70} Keynesian economics emerged as the favorite course of political economy, particularly in the countries more exposed to the risk of a communist ascent, ^{Footnote 71} or as a moderate alternative to planning. ^{Footnote 72} To influence overall levels of economic growth and employment, governments were in charge of the countercyclical management of aggregate demand. Accordingly, in times of economic recession, they were expected to boost aggregate demand through increases of public expenditures or lowered taxation, even at the cost of incurring budget deficits and inflation. In case of aggregate demand exceeding supply, governments were expected to run a budget surplus and restrictive monetary policy. ^{Footnote 73} On these macroeconomic bases, further initiatives could be undertaken with a view to both modernize the economy and promote general welfare. Keynesianism enabled the adoption of the Fordist pact, whereby left parties and trade unions accepted the scientific organization of labor to improve efficiency, while big business accepted increased wages and economic security for employees not only as per se valuable objectives, but also for the gains in terms of productivity and sale opportunities. ^{Footnote 74}

Within a similar framework, monetary policy was viewed as contributing to this comprehensive macroeconomic effort. ^{Footnote 75} In this perspective, central banks could be endowed with a certain degree of operational autonomy, but their activity was expected to complement the economic policy devised by democratic institutions. As a result, fiscal policy concerns came to dominate monetary policy. Once abhorred as symptom of an undisciplined economic policy, money creation under the instructions of national government and the last resort purchase of public bonds with a view to control their price and constrain financial speculation became common practices for most of the central banks. ^{Footnote 76}

This notion of monetary policy had clear institutional implications. If monetary policy was to contribute to general economic policy, it could not remain disconnected from fiscal policy and insulated from the ordinary democratic circuit. It is therefore not surprising that the era of the DSCS opened almost everywhere with the approval ^{Footnote 77} or the completion ^{Footnote 78} of nationalizations of central banks. Moreover, the newly adopted constitutions omitted almost entirely to discipline the monetary system and central banks—a decision that facilitated the subordination of the latter to national democratic institutions. ^{Footnote 79} The choice of regulating central banks through legislation was therefore widespread, ^{Footnote 80} leaving to governments the responsibility for the formulation of the monetary policy within the guidelines defined by parliaments. ^{Footnote 81} In these statutes, monetary objectives were no longer defined with an exclusive view to price stability as central banks’ mandates were extended to a broader range of goals. ^{Footnote 82} A general trend of central banking operating at the behest of the treasuries was established: Monetary policy was a key policy field for the life of a country and the technocratic authorities entrusted with its implementation could not replace or displace the political economy decisions adopted by political authorities. ^{Footnote 83}

The case of France was probably the most eloquent manifestation of this tradition of government-led monetary policy. ^{Footnote 84} In the interwar period, the independence of the central bank had acquired as elsewhere an exquisitely political connotation, that is, a constraint to the expansionist fiscal policies of left-leaning governments. ^{Footnote 85} In the aftermath of World War II, this model was plainly rejected. The nationalization of Banque de France was completed in 1946 and throughout all the Fourth Republic, the central bank supported the monetary policy of government, albeit being critical of the practice of creating money to finance deficit spending. The subordination of Banque de France to government became particularly intense in the 1960s, a period in which no important decision could be taken without the consent of the Treasury. ^{Footnote 86} This institutional arrangement was codified in the Bank Act of 1973, ^{Footnote 87} although in the context of a more flexible legislative framework. ^{Footnote 88} In this context, the bank continued to operate as banker for the state, servicing its debts by means of credits and the purchase of government bonds. The facilitation of credit was subject to an agreement between the Banque and the Minister of Economic Affairs and Finance, to be approved by the National Assembly. ^{Footnote 89}

Nevertheless, not in all European countries Keynesianism and the idea that money creation could depart from the rule of rigid convertibility into gold were perceived as coherent with the ongoing effort of the DSCS to move the structures of European states in a more democratic and social direction. ^{Footnote 90} Even among the ranks of those committed to social justice and activist government, the idea of financing public expenditure through monetary emissions was frowned upon. ^{Footnote 91} Particularly in Germany, the ordoliberal notion that the central bank should be entrusted with a narrow mandate centered on price stability and a broad degree of operational independence became predominant, ^{Footnote 92} to the extent of justifying a derogation to the otherwise unflinching commitment of the Basic Law to ministerial accountability and representative democracy. ^{Footnote 93}

Many reasons may explain the German aversion to Keynesian policies, chief among these the trauma of the hyperinflation of the early 1920s. The way in which memory of these events was elaborated presented Keynesianism as offering ill-advised suggestions such as profligate fiscal policies and currency manipulation. ^{Footnote 94} Keynesian ideas were therefore preempted by another set of policies oriented toward the supply side and the so-called “social market economy.” ^{Footnote 95} This alternative course of political economy implied a return to an institutional pattern rooted in the late 19^th Century, when the state had pursued supply-side policies with domestic demand subordinated to the needs of industrial capital, extensive programs of social insurance for securing social peace and “organized capitalism.” ^{Footnote 96} In the aftermath of World War II, this set of policies found ideological legitimation in ordoliberalism, ^{Footnote 97} a course of political economy committed to the primacy of monetary policy guaranteed by a strong and independent central bank, an open international economy to favor exports, increased market competition, and limited state intervention. ^{Footnote 98}

As noted above, this economic model was not entrenched at a constitutional level. Indeed, originally the Basic Law did not consider the federal budget as a tool for the macroeconomic stabilization. The original Finanzverfassung was essentially procedural in nature, its main focal point being the regulation of the budgetary prerogatives of the Federal Government and Parliament. ^{Footnote 99} To be sure, article 110 of the Basic Law required to balance the budget, but the prevalent view was that public expenses could be financed also through state-issued bonds. ^{Footnote 100} Within this constitutional framework, ordoliberal policies remained exposed to democratic challenge, an aspect which became evident in mid-1960s when, in the context of the first post-war recession, Keynesian ideas gained some foothold. ^{Footnote 101} This new course of political economy found its utmost expression not only at the legislative level, ^{Footnote 102} but also in amendments to the Basic Law aimed at macroeconomic stabilization via fiscal interventions. “Overall economic equilibrium” ^{Footnote 103} emerged as the new catchword to convey the notion of an economic constitutional order committed to price stability, a high level of employment, external balance, and steady economic growth. ^{Footnote 104} But in particular a new approach to public debt, in which borrowing was explicitly authorized with regard to public investments, ^{Footnote 105} turned the federal budget into a key device to steer economic policy. ^{Footnote 106}

Nevertheless, these forays into Keynesianism were brief and qualified due to the restraints imposed by the independent Bundesbank. ^{Footnote 107} West Germany could appear also in this respect an outlier. The peculiar choice of reinstating independent central banking as a defining feature of the material economic order ensued the successful experience of the independent Bank deutscher Länder, the forerunner of the Bundesbank established under Allies occupation. ^{Footnote 108} When monetary sovereignty was returned to the West Germans, central bank independence was presented as one of the key drivers of the ongoing economic miracle and, more questionably, as the antidote to the hyperinflation of 1923. ^{Footnote 109} By the same token, political control of the central bank was associated with the unleashing of hyperinflation and with the war-mongering policies of the Nazis in the late 1930s. ^{Footnote 110} No surprise that in the political struggle leading to the establishment of the Bundesbank in 1957, the latter ended up being designed as independent. ^{Footnote 111} Nevertheless, in one key aspect, the Bundesbank was similar to its European counterparts: Independence from government instructions was not originally required by the Basic Law, which expressly provided only for a federal central bank, ^{Footnote 112} but was set out at legislative level ^{Footnote 113} —a choice that did not entirely exclude parliamentary control, but fixed it on a long term perspective, as the frustration of expectations could lead to legislative backlash by the parliament. ^{Footnote 114} Likewise, it was in the Bundesbank Act, and not in the Basic Law, that the mandate of the central bank was defined with a prevalent view to price stability. ^{Footnote 115}

Within this legislative framework, monetary policy was consistently conceived as a means to encourage investments and an export-led growth, ^{Footnote 116} while the possibility to finance government expenditures was strictly constrained. This occurred in circumstances in which the goal of economic reconstruction could have justified expansive monetary measures. ^{Footnote 117} Admittedly, during the brief experiment with Keynesianism of the late 1960s, even the Bundesbank cooperated with government by easing interest rates and financing increased deficit. ^{Footnote 118} Yet, its involvement in these new institutional arrangements was ambivalent, as shown by the decision in 1969 to deny support to government policy in order to safeguard the value of currency—a move signaling an evident discomfort towards fiscal dominance. ^{Footnote 119} On the whole, however, this legislative framework benefited the standing of the Bundesbank, contributing to its affirmation in the constitutional system as an independent fourth branch of government.

II. The Ambivalent European Economic Communities

Openness was also the prevailing trait of the original institutional framework of the EECs. As in the case of the DSCS, this feature reflected divergences among the political forces sustaining the European integration project. In this regard reference is made not so much to the tensions between the supporters of a pan-European political community and the proponents of a more modest intergovernmental form of cooperation. Far more crucial was in fact the divide between the forces willing to reaffirm at supranational level the commitments inspiring the DSCS and those aiming at their rebuttal. ^{Footnote 120} Indeed, following a trend initiated in the late New Deal, ^{Footnote 121} Christian Democrats and Social Democrats conceived of supranational agencies as key components of a new world order enabling their commitment to activist government. ^{Footnote 122} At the same time, Conservatives and Liberals imagined the multilateral framework in the making as a suitable vehicle to reinstate the principles of the laissez-faire economic order defeated at national level. ^{Footnote 123}

Against this background, the ambivalence of the EECs should not come as a surprise. On the one hand, their commitment to market building would soon become a target for the most left-leaning parties opposing the ratification of the founding treaties. ^{Footnote 124} On the other hand, the abundant concessions to state interventionism gave the European integration project a protectionist twist, at least if compared with the liberalization projects undertaken more or less in the same period under the GATT or the OEEC. ^{Footnote 125} So, although the making of a common market expressed a certain purposive orientation also on the part of the EECs, it was not clear whether the goal of the founding treaties was simply countering the autarchic tendencies of the nation-state or rescuing the economic freedoms and property rights from their downgrade under the DSCS.

Aside from the idiosyncrasies of their proponents and opponents, the founding treaties established a peculiar form of economic integration based on the free movement of productive factors, the harmonization of competitive conditions and the coordination of macroeconomic policies. Free movement was pursued through a set of regulatory principles and specific legal bases. The former included both prohibitions of nationality discriminations ^{Footnote 126} and the commitment to remove hindrances to market access. ^{Footnote 127} The latter foreshadowed a process of gradual liberalization to be attained by Community political institutions through the approval of measures of secondary law. ^{Footnote 128} Also, the harmonization of competitive conditions required regulatory interventions on the part of Community institutions. ^{Footnote 129} The treaties made it clear that this goal could not be left entirely to the operation of market forces, ^{Footnote 130} but it required regulatory plans to prevent market liberalization that would unleash regulatory competition. ^{Footnote 131} Lastly, to achieve treaties objectives, a certain degree of macroeconomic coordination was in order. ^{Footnote 132} The treaties required the member states to conceive their economic policies as matters of common concern, ^{Footnote 133} namely to avoid trade imbalances, secure price stability, and promote a high level of employment. ^{Footnote 134} Also in this respect, Community institutions were expected to provide a significant contribution in terms of coordination of national economic and monetary policies. ^{Footnote 135}

Within this institutional framework, several were the regulatory strategies available for Community policy-makers. ^{Footnote 136} From the early 1960s to the mid-1970s, the material economic order that was actually implemented was predominantly congenial to the consolidation of the DSCS. ^{Footnote 137} Particularly during the transitional period, the free movement of productive factors and the harmonization of competitive conditions were promoted primarily through regulatory interventions by the Community institutions. The notion of a regulatory level playing field inspired those political efforts, on the assumption that the type of competition fostered by the common market in the making was to enhance firms’ efficiency and innovation rather than regulatory or tax competition among the member states. ^{Footnote 138} In principle, such a sweeping harmonization could rely on the legal bases enshrined in the Treaty of Rome, and the Court of Justice on several occasions endorsed their potentially limitless remit. ^{Footnote 139} Yet, after the “empty-chair crisis” and the Luxembourg Compromise, the notion of a centralized model of economic integration ^{Footnote 140} appeared illusory, leaving room for a more modest and decentralized regulatory strategy. ^{Footnote 141}

Already, in the transitional period, the European Court of Justice had decided that free movement norms could be invoked before national courts to challenge national measures. ^{Footnote 142} In the policy stalemate following the Luxembourg Compromise, the judicial enforcement of market principles could appear an alternative to positive harmonization, in particular for economic actors interested in piecemeal deregulation or the subversion of states’ activist plans. ^{Footnote 143} Yet, for a rather long period the Court of Justice did not indulge such litigation strategies. With the noteworthy exception of border measures, on which the case-law of the Court was merciless, ^{Footnote 144} the judicial enforcement of market principles vis-à-vis national measures targeted mainly direct ^{Footnote 145} or indirect ^{Footnote 146} discriminations, thereby leaving largely unaffected the possibility for state legislatures to achieve their economic and social goals. This deferential attitude towards state interventionism also inspired the interpretation of the treaty principles on state aids, whose enforcement in the face of the economic and social policy objectives pursued by the member states remained marginal until the end of the 1970s. ^{Footnote 147}

Deference towards states’ economic and social policies was also the strategy inspiring macroeconomic coordination in this period. Already with the European Payment Union under the OEEC, trade imbalances between European countries had been tackled and a sufficient level of exchange rates stability ensured to foster intra-European trade. The goal of containing currency fluctuations for trade purposes was also key in the Bretton Woods

System. In principle, the semi-pegged exchange rates therein decided, if coupled with capital mobility, could threaten member states’ autonomy in fiscal and monetary matters. Yet, for a rather long period, that scenario did not materialize. In the 1960s the implementation of article 67 EEC on free movement of capital had been pursued on the basis of two directives specifying that a set of capital movements was not liberalized. ^{Footnote 148} Other capital controls were liberalized but, in case of an adverse impact on national economic policies, they could be reinstated. In this regard also the case-law of the Court of Justice was cautious. Up until the 1980s the Court was perfectly aware of the fact that complete freedom of movement of capital could undermine the economic policies of the member states or destabilize their balance of payments. ^{Footnote 149} It is not by chance that, unlike the other free movement provisions, article 67 EEC was not considered directly effective, with the result that freedom of movement of capital was mainly recognized as authorizing the payments necessary for the exercise of other economic freedoms. ^{Footnote 150}

In this context, European macroeconomic coordination secured favorable conditions for states’ activist plans. ^{Footnote 151} To be sure, this implied that the full economic benefits of a common market would not be reaped. But in that political and economic environment, the common market was still imagined as complementing and, therefore, aligning with the DSCS. This institutional arrangement made the fortune of the European nation states by contributing to their economic success in les trente glorieuses. ^{Footnote 152} Nevertheless, the oil crises of the 1970s, the end of the Bretton Woods System, and the gradual abolition of its attendant capital controls led to a reorientation of the European integration process and the establishment of a new material economic order in which the ambivalences of the Treaty of Rome were resolved in a neoliberal direction. Accordingly, economic freedom, property rights and price stability were gradually reinstated as the key drivers of the material economic order. This move did not necessarily imply a revival of laissez-faire: Rather than simply advocating economic abstentionism, neoliberalism purported to transform state activism and reorient policy-making towards the creation of the organizational and subjective conditions for entrepreneurship. ^{Footnote 153} The consequences of this new course of political economy were far-reaching: While the neoliberal agenda could quite easily align with the ordoliberal rendering of the DSCS, its relationship with Keynesianism was more tormented.

First, the redefinition of the material economic order was carried out in the field of free movement of goods. Therein the goal of completing the single market entailed a gradual shift from the decentralized model of economic constitution experimented in the foundational period to an economic constitution combining elements of both the competitive and centralized models. The focal point of that shift was mutual recognition, the notion inspiring Cassis de Dijon, ^{Footnote 154} the judicial ruling that in many respects marked the watershed in that evolutionary process. Two were the far-reaching innovations introduced by that judgment. First, building on pioneering case-law on non-tariff barriers, ^{Footnote 155} the Court reviewed host state product requirements in the light of an obstacle-based rather than discrimination-based test. ^{Footnote 156} That move transformed the prohibition of measures having equivalent effects to quantitative restrictions into an economic due process clause of sorts, enabling judicial challenges to broad swathes of domestic regulation. ^{Footnote 157} In the ensuing judicial proceedings, the low threshold defined by the obstacle-based test would easily permit to litigants to shift to national governments the burden of justifying policy measures in the light of the mandatory requirements doctrine. Second, in order to promote the mutual recognition of national regulatory standards, the Court of Justice employed a set of rather strict proportionality tests, at least if compared with the standards of review normally in use by national constitutional courts. ^{Footnote 158} Depending on the stringency of the selected test, ^{Footnote 159} mutual recognition could either reinforce ^{Footnote 160} or call into question ^{Footnote 161} the standards of protection autonomously defined by national governments. Thus, the judicial rulings conforming with the Cassis De Dijon doctrine did not necessarily displace domestic regulations or unleash regulatory competition. ^{Footnote 162} Nonetheless, they increased the overall pressure on national governments, and all the more when judicial mutual recognition was generalized to all productive factors. ^{Footnote 163} State activism was also subjected to more intensive oversight in the light of state aid rules. ^{Footnote 164}

The neoliberal rendering of the Treaty of Rome did not rest only on an increased emphasis on negative integration. Cassis de Dijon was immediately synchronized with the Commission legislative agenda targeting state measures justified in the light of the mandatory requirements doctrine for harmonization purposes. ^{Footnote 165} The implementation of this re-regulatory strategy became a realistic prospect in the mid-1980s, when the Single European Act provided a suitable legal basis to overcome national vetoes through qualified majority voting. ^{Footnote 166} The increased political capacity of the Community seemed to enable a new stage in the building of the single market, in which supranational political institutions were finally in the position to approve uniform rules responding to both the facilitative and protective concerns implied in market regulation.

However, the success of this strategy was only partial. To be sure, the turn to qualified majority voting accelerated the approval of the directives listed in the White Paper on the completion of the single market, ^{Footnote 167} making of market building and mutual recognition primarily a legislative matter. ^{Footnote 168} Yet, the turn to positive integration also included a few critical downsides. First, the appeal of qualified majority voting led to the adoption of legislative measures also in fields not immediately related to the regulation of markets, on the basis of the vague suspect of their adverse impact on the competitive level playing field. ^{Footnote 169} This led not only to a potentially limitless expansion of supranational legislative competences, but also to a crucial reconsideration of environment, health or culture related national regulations in the light of supranational economic rationality. ^{Footnote 170} Second, qualified majority voting did not apply to the harmonization of fiscal provisions, free movement of persons and the rights and interests of employed persons. ^{Footnote 171} Therefore, owing to the difficulties of a legislative back-up in case of deregulation, national measures falling in those policy areas remained more exposed to the vagaries of judicial politics. Third, the shift to qualified majority voting facilitated the adoption of the Directive 1988/361, the legislative act which abolished the restrictions on capital movements within the Community. ^{Footnote 172} As seen, capital controls had constituted the keystone of the system of macroeconomic coordination enabling state interventionism, thus their abolition increased the pressure on national governments to secure conducive macroeconomic conditions. ^{Footnote 173}

Admittedly, capital mobility does not necessarily entail the sacrifice of national political autonomy, notably if exchange rates are left free to float. Yet, the adoption of Directive 88/361 took place in an entirely different context. To cope with the macroeconomic instability following the collapse of the Bretton Woods System, European countries had significantly reconsidered their exchange rate system. Approximately at the same time in which Cassis de Dijon was decided, the European Monetary System (EMS) had been established in an attempt to constrain currency fluctuations. ^{Footnote 174} The EMS required the definition of an official central exchange rate for all currencies, which were left to float within bands determined for distinct groups of countries. When a currency reached the limits of the band, participating countries were expected either to intervene via their central banks or to negotiate a change of the parity rates. As a consequence, also within this system, capital controls were the conditio sine qua non enabling national fiscal and monetary policies. Absent those restrictions, not only would the margins for national autonomy be depleted, but also the weakest national currencies would end up being exposed to speculative attacks. ^{Footnote 175}

I. The Entrenchment of Neoliberalism

The way out from the fragility of a semi-pegged exchange rate regime was moving to a monetary union. ^{Footnote 176} At least in hindsight, that is exactly the destination of the trajectory linking Cassis de Dijon, the EMS, the SEA, and the Directive 88/361. As said, at the time of their adoption, the neoliberal inclination of those decisions was already evident, but the same could not be said about their final goal, as a full monetary union was not necessarily conducive to the displacement of the DSCS. The plans designed in the 1970s and 1980s recognized that the increased mobility of productive factors coupled with fixed exchange rates would augment regional differences, all the more in a Community enlarging to countries like Greece, Spain, and Portugal. ^{Footnote 177} To achieve a full monetary union, it was recommended, a sizeable supranational budget ought to be established to support the regions in difficulty and facilitate the modernization of their economies. ^{Footnote 178} In this perspective, far from evoking the destabilization of the DSCS, the monetary union nourished the idea of its pan-European restatement. Two institutional developments taking place during the same period were coherent with the imaginary of a pan-European DSCS. The Communities were expanding their legislative competences to increasingly salient policy fields and improving the liberal and democratic credentials of the European policy-making with, respectively, a judge-made bill of rights and a popularly elected European Parliament. Against this background, the neoliberal turn of the late 1970s and 1980s could appear only the avant-garde of a process which would soon be rebalanced with the addition of more robust democratic and social components.

To be sure, the realization of this scenario implied a good dose of optimism about the capacity of the Community to create the social, political, and economic preconditions required to create a full monetary union and a pan-European constitutional democracy. ^{Footnote 179} And even more optimism was needed to imagine that, in a general political and intellectual climate marked by the rise of rampant neoliberalism, a similar plan could actually be accomplished. Thus, it is not surprising that the economic constitution conceived at Maastricht was remarkably different from those earlier ideas. To a considerable extent, its contents developed and consolidated the neoliberal trend of Cassis de Dijon, the EMS and Directive 88/361. But whilst those earlier decisions were not set in stone—given different political equilibria at supranational level, they could have been easily reversed—the Treaty of Maastricht made them de facto irreversible by entrenching their underlying motifs as the new economic constitution of the Eurozone. Since then, it could no longer be claimed that the EU institutional framework had been made for people of fundamentally differing views. Indeed, economic norms and institutions were conceived to further a particular economic model and, as a reflection, to prompt, as a matter of constitutional law, the neoliberal transformation of the DSCS. ^{Footnote 180} To put it simply: By elevating a particular economic paradigm to the status of uncontested truth, ^{Footnote 181} the Treaty of Maastricht turned the Community legal framework into a prevailingly purposive constitutional order. Hereafter, it was on that questionable constitutional basis that the realignment of the EU and the DSCS ought to be pursued.

Sure, this is not how the Treaty of Maastricht is conventionally presented, ^{Footnote 182} and therefore more needs to be said to substantiate the thesis of its neoliberal purposive inclination.

First of all, the creation of a monetary union presupposed a more uncompromising commitment to free movement of capital. The Treaty of Maastricht reframed the relevant treaty principle in purely obstacle-based terms ^{Footnote 183} upgrading at constitutional level the approach inspiring Directive 1988/361. ^{Footnote 184} The scope of application of free movement of capital was extended also to third countries, thereby amplifying the disciplinary potential of international financial markets. ^{Footnote 185} Soon afterwards, this move was reinforced by key rulings of the Court of Justice overruling earlier more cautious case-law: The Court endowed the newly introduced treaty provision with direct effect, ^{Footnote 186} and went back also on the notion that the general financial interests of a member state could justify the retention of capital controls. ^{Footnote 187} This more assertive judicial orientation reinforced the idea already hinted in Cassis de Dijon of considering market principles as judicially enforceable constitutional rights. ^{Footnote 188} But whereas in the case of product requirements the deregulatory potential of market principles could be contained through positive harmonization, in other more extreme applications of that approach this could no longer be taken for granted. In particular, when the Court extended the scope of application of free movement principles to salient national economic and social policies such as taxation ^{Footnote 189} or industrial relations, ^{Footnote 190} the Treaty of Maastricht did not offer adequate legal bases to counter deregulation.

The same neoliberal inclination was visible in the structure of the new competences inserted in the Treaty. In expanding the scope for EU policy-making in fields normally associated with state activist government, the new legal bases did not simply single out new areas of EU intervention open to democratic and intergovernmental negotiation. ^{Footnote 191} New legal bases came often with the specification of policy directions pre-empting key democratic choices through neoliberal guidelines. ^{Footnote 192} For instance, the goal of price stability was prioritized in monetary policy, ^{Footnote 193} workers’ adaptability in employment, ^{Footnote 194} and competitiveness in industrial policy. ^{Footnote 195} Admittedly, the same legal bases included also textual references to other policy objectives which, in later treaty revisions, would further be enriched with more ambitious substantive goals ^{Footnote 196} and horizontal clauses. ^{Footnote 197} Yet, those textual gestures could only cloak with a pluralist veneer the actual post-political ^{Footnote 198} structure of an overabundant ^{Footnote 199} and potentially asphyxiating ^{Footnote 200} constitutional framework. ^{Footnote 201} Indeed, the latter did establish a clear hierarchy among those goals, leaving to political institutions only the decision on how to attain neoliberal targets while maximizing competing interests. ^{Footnote 202}

The Court of Justice was ready to follow suit also in this respect. In a landmark case on positive harmonization, ^{Footnote 203} it ruled that the principle of conferred powers required EU market regulations to contribute to the removal either of obstacles to access to market or to appreciable distortions of competition. The ruling entailed a purposive reframing of EU market regulation. By virtue of that judgment, the legal basis introduced by the SEA could no longer be interpreted as open-ended provisions enabling limitless legislative activity. Critically, this did not lead to the abandonment of EU policy initiatives in those fields, but just to their reframing in the light of economic rationality. ^{Footnote 204} In other words, short of autonomous legal bases to ground legislation on non-economic issues, EU political institutions resorted to market harmonization anyway. But to qualify under its new interpretation, EU interventions first had to advance market openness or undistorted competition. ^{Footnote 205}

However, the entrenchment of the neoliberal policy agenda in the EU constitutional order found its utmost manifestation in the architecture of EMU. At first glance, the goals inspiring economic and monetary policy could appear in line with the canons of open constitutions. Price stability, sound public finances, and monetary conditions and a sustainable balance of payments were listed as guiding principles on an equal footing. ^{Footnote 206} Tellingly, the list did not include full employment, but that was just the first minor hint at a more skewed architecture.

Short of the requisite degree of political and social legitimacy to sustain a robust supranational fiscal policy, the Union opted for an asymmetric institutional arrangement decoupling monetary and economic policy. The need to reap the full benefits of capital mobility and overcome the fragilities of a semi-pegged exchange rates regime favored the creation of an incomplete monetary union, that is, a monetary union without a sizeable budget. ^{Footnote 207} Thus, monetary policy ^{Footnote 208} was federalized and depoliticized, ^{Footnote 209} whilst economic and fiscal policy were retained by the member states as national constitutional prerogatives subject only to intergovernmental macroeconomic coordination. ^{Footnote 210} This disconnect of monetary and economic policy was by no means neutral as it implied the weakening of the macroeconomic steering capacities of Eurozone states. ^{Footnote 211} The impact of this asymmetric architecture was felt in particular in the countries with a more ingrained Keynesian tradition, where fiscal policy concerns used to dominate monetary policy. ^{Footnote 212} Indeed, a single and independent federal monetary policy could not be synchronized with the needs of several fiscal policies and, more broadly, of highly heterogeneous national economic systems.

The disconnect between monetary and fiscal policy and, as a reflection, the de facto neutralization of Keynesian courses of national economic policy were accentuated by the particular form assigned to EU monetary policy. In this regard, the German experience of the Bundesbank was taken as a model and generalized in a radicalized form for the rest of the Eurozone. ^{Footnote 213} As noted above, up until the treaty of Maastricht, the narrow mandate and the independence of the Bundesbank had been established through legislation, thus they were formally reversible by an ordinary political majority. In the design of the European Central Bank (ECB), the Treaty of Maastricht upgraded those choices to the status of constitutional norms, thereby pushing them beyond the reach of any meaningful form of political accountability. ^{Footnote 214}

First of all, monetary policy was framed as the quintessential purposive competence. In a context still reminiscent of the high inflation of the 1970s, the ECB was entrusted with a narrow mandate centered on price stability as primary goal and the support to general economic policies only as secondary objective. ^{Footnote 215} The treaty left it open to the ECB to define the contents of price stability, but foreclosed the pursuit of other objectives to the detriment of the main goal. ^{Footnote 216} Secondary goals, therefore, could be pursued only indirectly, that is, the ECB could not engage in autonomous policymaking in their respect, but could promote their achievement only through monetary policy decisions advancing or, at least, leaving unaffected the primary goal. ^{Footnote 217}

Ironically, the preference for a purposive competence and a narrow mandate for the ECB was defended on democratic ground. Monetary policy was presented as an area requiring a level of expertise, temporal consistency and policy credibility unattainable for ordinary political institutions. ^{Footnote 218} To put it in a single line: The protection of the value of money could justify a restriction on democracy and the delegation of regulatory powers to an ad hoc independent agency. ^{Footnote 219} Yet, democratic concerns imposed that the mandate of the latter be limited in scope, hence the prioritization of price stability. Other considerations could lead to a more critical assessment of how monetary policy was being shaped. First, the exclusive definition of price stability on the part of the ECB implied the depoliticization of key decisions concerning macroeconomic magnitudes with clear redistributive implications. ^{Footnote 220} Second, a mandate limited to price stability implied a drastic loss in terms of policy capacity, in that the possibility for monetary policy to complement national fiscal policies in their efforts to support aggregate demand was further undermined. Third, the prioritization of price stability was questionable also in terms of political freedom, ^{Footnote 221} because within the new institutional landscape the prospects of implementing the Keynesian version of the DSCS appeared dim.

The decision in favor of entrenchment encompassed also the independence requirements of the ECB. ^{Footnote 222} Not satisfied by having set up a central bank operating in the absence of any meaningful relationship with an equivalent political partners, ^{Footnote 223} the Treaty of Maastricht reinforced its insulation with the express constitutional prohibition of monetary financing. ^{Footnote 224} Again, also this choice made perfect sense within an institutional framework conceived to enhance the disciplinary power of international financial markets and constrain the deficit bias of democratic decision-making. ^{Footnote 225} At the same time, the prohibition of monetary financing was a gravestone on the possibility to pursue courses of political economy other than that presupposed by the Treaty.

Finally, the neoliberal structure of the monetary union also influenced the direction and the structure of the macroeconomic coordination of national economic policies. The combination of a single currency and capital mobility entailed conducive national economic policies to avoid negative externalities. In particular, excessive borrowing by national governments could engender inflationary pressures and, in the most dramatic cases, even costly defaults whose effects would not remain confined within national borders. To cope with these risks, the treaty set up a more intense managerial system of coordination consisting of both positive targets to steer economic policy and negative limits to prevent externalities.

The positive dimension was the one with the weakest traction. Macroeconomic coordination was expected to ensure the broad range of goals included in article 3 TEU, but, critically, national economic policies should be conducted in accordance with the principle of an open market economy with free competition. ^{Footnote 226} To achieve the general goals, a soft law system of coordination was established relying on broad guidelines and a mechanism of multilateral surveillance centered in the Council and the Commission. ^{Footnote 227} In principle, this institutional framework was more open than that observed in monetary policy and in the single market for the constraints of treaty objectives and the surveillance procedure were definitely less penetrating. ^{Footnote 228}

Nevertheless, the neoliberal leaning of macroeconomic coordination was more pronounced in its negative dimension. Even in this regard treaty norms were not confined to core issues, but entrenched a particular vision of economic policy relying on governance arrangements and the disciplinary force of financial markets. ^{Footnote 229} A general ban on excessive deficits was established, ^{Footnote 230} with uniform reference values spelled out at quasi-constitutional level. ^{Footnote 231} Quantitative limits on government deficits and public debt were reinforced by a no-bail out clause. ^{Footnote 232} On the whole, therefore, fiscal rules expressed a certain skepticism towards borrowing and, as a reflection, the economic theories regarding it as an ordinary tool of economic policy. ^{Footnote 233} No consideration was paid to the reasons justifying borrowing, for instance by distinguishing between the debts incurred for public investments and those funding current spending. No equivalent attention was devoted to private indebtedness and macroeconomic imbalances, just as insufficient were the tools predisposed in the event of an economic and financial shock. So, also in this regard treaty framers preferred to occupy the constitutional framework with their more or less questionable economic doctrines with the intention of transforming it into an instrument of government. In moving in this direction, however, they overlooked the downsides of a prevailingly purposive constitutional framework—an aspect that they would start to realize in occasion of the economic and financial crisis began in 2007.

II. Increased Purposiveness and its Downsides

As elsewhere, also in the Eurozone the impact of the economic and financial crisis was extremely heavy. But unlike other advanced economies, EMU lacked adequate institutions and tools to cope with it. A crisis of this magnitude could have been the catalyst for a transformative process leading to a full monetary union and, in fact, the Eurozone architecture did change in some of its key aspects under the pressure of the crisis. Nevertheless, the transformation was preservationist in essence. The imperative of saving the Eurozone did not trigger the creation of a sizeable EU budget to endow EMU with fiscal capacity. The Eurozone that was saved remained the asymmetric creature conceived at Maastricht, supplemented by a complex set of measures radicalizing and, simultaneously, adapting the original neoliberal paradigm. Accordingly, member states experiencing difficulties in servicing their debt in financial markets received financial assistance, although subject to strict conditionality. A set of legislative and constitutional reforms were approved to improve the credibility of the commitment to sound finances of all the member states. And, eventually, also in Europe quantitative easing programs were adopted to counter deflation and economic stagnation. On the whole, these reforms augmented the purposiveness of the EU constitutional order, with the result of aggravating its detrimental impact on political pluralism and its difficulties in adapting to changing economic and political circumstances.

The first responses to the crisis by the Union were conceived on the assumption that the neoliberal model established at Maastricht was valid and what had not worked in the run-up to the crisis was its implementation. With this mindset in place, EU institutions embarked in a series of legislative reforms to intensify macroeconomic coordination with a view to foster budget discipline. ^{Footnote 234} This approach inspired the conditionality attached to the first vehicles of financial assistance engineered to respond to the emergency in the most affected countries, and led to the hardening of the Stability and Growth Pact for all. ^{Footnote 235} The wisdom of constraining public investments and, more in general, of depriving national economies of meaningful fiscal support in an adverse economic cycle was questionable on policy grounds. But as long as those measures were incorporated in legislative acts, they remained exposed to EU democratic competition and open to a relatively easy reversal.

Legislative reforms, however, did not seem to assuage the concerns for the fiscal credibility of EU member states. But instead of reconsidering their policy strategy, EU institutions and member states opted for their constitutional entrenchment. The first move in that direction was the insertion in the treaty of a provision permitting the Eurozone countries to set up a stability mechanism granting financial assistance subject to strict conditionality. ^{Footnote 236} At first glance, this new constitutional provision could seem to abandon the categorical wording of the no bailout clause or, at least, to introduce a qualification to its clear-cut prohibition. ^{Footnote 237} Yet, the qualification was not meant to open up the institutional framework to alternative courses of political economy. As the European Court of Justice was ready to admit, the strict conditionality attached to financial assistance was conducive to the goal of the no bailout clause, namely fostering budgetary discipline and maintaining the financial stability of EMU. ^{Footnote 238}

Budgetary discipline and financial stability were also the goals inspiring the second constitutional reform, the Treaty on Stability, Coordination and Governance (hereafter TSCG). The strategy therein pursued was the entrenchment of the highly ambitious fiscal targets set out in the reformed Stability and Growth Pact and, critically, their incorporation in national constitutional settings. Thus, the TSCG required the budgetary position of the member states to be in balance or surplus. ^{Footnote 239} Member states were also expected to insert balance budget rules in their constitutions ^{Footnote 240} as well as to adopt automatic correction mechanisms to be activated in case of significant deviations from their specific fiscal targets. ^{Footnote 241} A duty to drastically reduce public debt to reach the 60 percent threshold was also introduced, ^{Footnote 242} and member states subject to excessive deficit procedure were required to enter in economic partnership programs including structural reforms of their economies. ^{Footnote 243}

Clearly, these norms stiffened further the neoliberal profile of the EU constitutional order and, what is worse, entailed on those questionable normative bases the alignment by national constitutional settings. As purposiveness escalated, it became increasingly evident that the Eurozone was no place for the Keynesians. ^{Footnote 244} The policies adopted at the behest of the Union and the closure of the institutional framework fueled antagonism and resentment in both creditor and debtor countries. ^{Footnote 245} No surprise that, in a context of unmediated and suppressed political conflicts, EMU and, as a reflection, the EU came to be regarded by significant parts of national electorates as toxic projects to be overthrown.

The deterioration of the EU institutional architecture entailed another phenomenon typical of prevailingly purposive constitutional orders. After few years from its adoption, the TSCG revealed all its rigidity and incapacity to deal effectively with the ongoing financial and economic crisis. Fiscal rules were repeatedly violated without sanctions by EU supervising authorities. From being conceived as categorical norms, fiscal rules were reinterpreted as indicative targets steering national economic policies. In place of rule enforcement, EU economic governance resorted to a broad usage of discretionary flexibility to carve out some interstice for counter-cyclical fiscal policies. ^{Footnote 246} But even if this relaxation of fiscal rules made probably much more economic sense than their strict application, it did not imply the abandonment of the persisting purposive orientation of the EU institutional setting.

A similar elusive approach was visible also in the field of monetary policy. As the reform of fiscal rules and the vehicles of financial assistance revealed insufficient to appease financial markets, it was up to the ECB to step in as the ultimate institution ensuring macroeconomic stability. So, if at the beginning of the crisis the ECB seemed to abide by its modest role, ^{Footnote 247} later it started to operate as a lender of last resort of private financial institutions and sovereign states. This move was coherent with the programs already implemented by other central banks outside the Eurozone but uneasily sat with the original mandate defined in the treaty. In particular, the launch of programs like the Outright Monetary Transactions (OMT) ^{Footnote 248} and the Public Sector Purchase Programme (PSPP) ^{Footnote 249} presupposed a generous construction of the boundaries of a monetary policy primarily focused on price stability as well as a lenient interpretation of the prohibition of monetary financing. Nonetheless, the ECB was forced essentially by the circumstances to proceed in that direction, first to stabilize financial markets and then to contrast deflation and relaunch economic growth. ^{Footnote 250}

No matter how economically sound and effective those measures were, their constitutional implications were problematic for at least two interlinked reasons. First, the developments at issue could raise justified concerns from a rule of law standpoint. Against the standard set by the original interpretation of the treaties, those measures were rightly regarded as unconventional. ^{Footnote 251} As noted in the case of the no bailout clause, also in this respect judicial validation required a considerable degree of deference and a number of qualifications on the part of the courts involved. Yet, unlike in the case of the no bail-out clause, the ECB programs entailed also the systematic reconsideration of earlier judicial qualifications—a fact that, clearly, sits at odds with the rule of law commitment of the EU. ^{Footnote 252} Indeed, the OMT program had been certified by both the Court of Justice and the German Constitutional Court on the basis of its exceptional character and its coupling with ESM conditionality. ^{Footnote 253} Those conditions were later challenged by the PSPP program, framed as a regular monetary policy intervention and untied from any formal conditionality. In the review of this program, both the CJEU ^{Footnote 254} and its German counterpart ^{Footnote 255} more or less agreed on a set of safeguards which programs of quantitative easing ought to respect to avoid the infringement of the prohibition of monetary financing. Yet, those limits were probably strained when, in the early phases of the Covid-19 Pandemic, the ECB implemented its Pandemic Emergency Purchase Programme (PEPP). ^{Footnote 256}

The second troublesome implication of ECB unconventional programs regarded democracy. Remember that the narrow scope of intervention originally assigned to the ECB was justified as a necessary and yet circumscribed derogation to the commitment to representative democracy of national constitutions. On these premises, an expansion of the ECB role would clearly create a void of democratic accountability. ^{Footnote 257} No matter how justified by the need to fight deflation and economic stagnation, ^{Footnote 258} the new ECB programs were implemented in a context of precarious democratic authorization and weak democratic controls. ^{Footnote 259} The economic and financial crisis showed how remote and costly was the possibility of reverting to the apparently cheerful days before the crisis, in which the pretense of a distinction between economic and monetary policy could still appear credible. Unconventional monetary measures were there to stay and, if at all, it was their institutional framework that required modification.