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P. Schlosser: ‘Tightening the knot’ - strengthening fiscal surveillance in EMU during the euro crisis

image-12/21/2015 - 10:21One of the key regularities which appeared to hold so far in European integration is that the closer a policy issue lies to the core of state sovereignty, the least likely it is for integration to occur in that domain (Boerzel, 2005; Lindberg and Scheingold, 1970). This should thus make the study of integration in fiscal policy, undoubtedly a core state power, particularly interesting. In a seminal contribution on the integration dynamics in the fiscal domain, Heipertz and Verdun (2010) looked at the unintended consequences of the Economic and Monetary Union’s (EMU) fiscal framework, the Stability and Growth Pact (SGP). They concluded that it is ‘far too early to look for substantial occurrences of political spill-over in the fiscal domain’ (2010: 82). However, recent evidence shows that the SGP’s reforms and expansion into a broader and more intrusive central fiscal surveillance regime, as part of the Six Pack, Fiscal Compact and Two Pack reforms, has led to further integration in the fiscal realm. To illustrate the most manifest signs of such a task expansion, Table 1 below summarizes the density of fiscal rules prior to the euro crisis and post-crisis. It illustrates the legalization process which Europe’s fiscal governance underwent during the euro crisis, confirming Mabbett and Schelkle’s claim that ‘if challenged in its regulatory endeavour, the EU tends to respond with more regulation’ (Mabbett and Schelkle, 2009: 1). The common thread of these substantial initiatives is that they aimed at strengthening the credibility and enforceability of EMU’s rules-based economic coordination regime through further formal competence transfer to a European fiscal centre, embodied by the Commission. In other words, the reforms changed the vertical balance of power between the EU centre and its Member States. A hardening of decision rules and sanctions occurred, both on the preventative and corrective arms of the Stability and Growth Pact. Overall, the new fiscal agreements allowed for further intrusion into the domestic budgetary processes and macroeconomic management within Member States.

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