How to reduce the EU's democratic deficit

The European Union has long suffered from a lack of legitimacy, but the euro crisis has worsened the problem. There is no silver bullet that can suddenly make the EU respected, admired or even popular among many Europeans. Its institutions are geographically distant, hard to understand and often deal with obscure technicalities.

Unless EU leaders can become more credible and legitimate in the eyes of voters, parts of the union could start to unravel. For example, at some point eurozone governments may seek to strengthen their currency by taking major steps towards a more integrated system of economic policy-making. But then a national parliament, general election or referendum may block those steps and so threaten the euro's future.

Political institutions gain legitimacy from either "outputs" or "inputs". The outputs are the benefits that institutions are seen to deliver. The inputs are the elections through which those exercising power are held to account. The euro crisis has weakened both sorts of legitimacy.

The outputs are hardly impressive. Economic growth is negative across much of Europe, unemployment in the eurozone is above 12% and youth unemployment in Spain and Greece is over 50%. For many citizens, it is not evident that either the EU or the euro are delivering a great deal in terms of benefits.

Meanwhile, input legitimacy is murky. Given the complexity of decision-making, with power shared among many institutions, lines of accountability in the EU have never been very clear. But the perception of a democratic deficit is a growing problem for the heavily indebted countries of the eurozone. The unelected "troika" – the European commission, European Central Bank and International Monetary Fund – has forced national parliaments to accept budget cuts and structural reform. Big decisions on EU bailout programmes are taken by eurozone finance ministers and heads of government.

So what can be done to improve the EU's legitimacy? European leaders should hasten to establish a banking union, to strengthen the financial system; Germany should stimulate demand, thereby helping southern European economies to grow; and structural reform should restore those economies' competitiveness. Then unemployment would start to fall, EU leaders would look more competent and support for eurosceptics and populists would wane.

But EU leaders also need to make power more accountable. For many MEPs, the solution is simple: when decisions take place at EU level, the European parliament should exercise democratic control. And if more decisions are being taken at EU level, they think, the parliament should gain more power over them.

However, the parliament – despite its good work on some legislation – has failed to convince a lot of people that it represents their interests. Many MEPs have little connection to national political systems. Much of the time, the parliament's priority appears to be boosting its own powers. It always wants a bigger EU budget and a larger role for the EU, but there is little evidence that many voters think the same way. That may explain why, though the parliament's powers have grown steadily since the first direct elections in 1979, turn-out has declined in every subsequent election (from 63% in 1979 to 43% in 2009).

Another reason why the European parliament cannot be the main democratic check on eurozone decision-making is that most of the money for bailouts comes from national parliaments, not the EU budget. True, decisions on bailouts and the conditionality that applies to them are taken at EU level by heads of government or finance ministers. But their decisions have to be implemented by national parliaments, which therefore play a crucial role in both donor and recipient countries: the Bundestag had to approve money for the Cypriot bailout, while Cyprus's parliament had to vote to wind up the island's banks.

These are reasons to increase the involvement of national parliamentarians in eurozone governance. In recent years several "inter-parliamentary" bodies have started to bring together members of parliament (MPs) and MEPs. And the recent fiscal stability treaty established a "conference" for MPs and MEPs to discuss economic policy. However, these gatherings, though useful, are merely consultative and do not give MPs a sufficient stake in the EU.

National parliamentarians could make the EU more accountable in two ways. First, the links between national parliaments should be strengthened. The Lisbon treaty created the "yellow card" procedure, whereby if one-third or more of national parliaments believe that a commission proposal breaches subsidiarity – the idea that decisions should be taken at the lowest level compatible with efficiency – they may ask that it be withdrawn. The commission must then do so or justify why it intends to proceed. This procedure, so far used just once, could become a "red card" procedure that allowed national parliaments to force the commission to withdraw a proposal. The fact that William Hague, the foreign secretary, has floated this idea – as has Douglas Alexander, his shadow – should not prevent its consideration. A similar system could enable national parliaments to club together to make the commission propose the withdrawal of a redundant law.

Second, a national parliamentary forum should be established in Brussels. Rather than duplicate the legislative work of the European parliament, it should ask questions about, and write reports on, aspects of EU and eurozone governance that involve unanimous decision-making. The forum could monitor the European Council and challenge decisions on foreign and defence policy, or policing and counter-terrorism. On eurozone matters the new body could meet in a reduced format, without MPs from non-euro countries, and vote on bailout packages. It could also question and perhaps appoint the euro group president. In the long run, MPs will have to become more involved in the EU because they bring a legitimacy that MEPs sometimes lack.