The dog that would never bite? The past and future of the Stability and Growth Pact

This paper analyses the underlying reasons for the creation of the Stability and Growth Pact (SGP) and its subsequent development in recent years. The paper examines the economic and political factors behind it, including the role of economic ideas, experts, politicians, institutional arrangements in the Maastricht Treaty, domestic politics, and the exceptional position of Germany in the realm of monetary integration in the EU. It concludes that a set of commonly held beliefs together with a corresponding power-political constellation explain the creation of the SGP. -- Das Papier analysiert die grundlegenden Bedingungen für das Zustandekommen des Stabilitäts- und Wachstumspakts (SGP) und seiner Entwicklung in den Folgejahren. Es werden ökonomische und politische Faktoren untersucht, insbesondere die Rolle wirtschaftspolitischer Vorstellungen und den Einfluss von Experten, Politikern, institutioneller Regelungen im Maastricht Vertrag, innenpolitischer Vorgänge und die Sonderstellung Deutschlands im Bereich der Europäischen Währungsunion. Die gemeinschaftlichen wirtschaftspolitischen Vorstellungen werden als notwendige Bedingung für die Schaffung des Paktes aufgefasst, und ihr Zusammentreffen mit einer entsprechenden machtpolitischen Spielkonstellation wird als dessen hinreichende Erklärung verstanden.

The EMU Stability and Growth Pact: Is it dead? If so, does it matter?

IN DECEMBER 2004, the new Barroso Commission brought the saga of the French and German infringements of the Stability and Growth Pact to a close by lifting the "excessive deficit" procedure launched in 2003. That same month, the Commission launched infringement proceedings against Greece that has been providing inaccurate public deficit statistics since the creation of the Pact in 1997. The new head of the Commission also declared that there would be no major overhaul of the Pact. In the November 2003 crisis, when the Council suspended the implementation of the Pact at a time France and Germany overshot its deficit ceiling, most observers called the Pact dead and many rejoiced since the Stability and Growth Pact had come under heavy criticism for some time. A year after, we asked four leading scholars that have studied monetary integration: have news of the death of the Stability and Growth pact been grossly exaggerated? Should it be resuscitated? Why or why not? Amy Verdun and Nicolas Jabko argue that the Pact will survive for lack of an alternative able to gather the support of a large bipartisan cross-national coalition. Henrik Enderlein then argues that the pact should not be fixed but broken. Finally, Andrew Martin explains why the real problem does not so much lie with the Pact per se, but instead with the philosophy behind the EMU policy mix (restrictive fiscal and monetary policies). It creates vicious circles: By keeping economic growth too low the European central bank retarded the expansion of public revenue, making it more difficult to meet the Pact requirements

STRENGTHENING THE EUROPEAN COMMISSION’S BUDGETARY AND ECONOMIC SURVEILLANCE CAPACITY SINCE GREECE AND THE EURO DEBT CRISIS: A STUDY OF FIVE DIRECTORATES-GENERAL

Has the executive role of the European Commission changed since the euro debt crisis? Intergovernmentalists point to the increased role of the member states and the Council at the expense of the Commission and other supranational institutions. This paper examines how the Commission has responded to the expansion of fiscal and economic rules such as the regulations that strengthen the EU’s statistical competence and the Six-Pack and Two-Pack. Based on interviews conducted with key staff, we find that these rules have created significant coordination, information, and analytical demands on the Commission. The latter has enhanced its horizontal and vertical coordination efforts, prioritized staff for the Directorate-Generals conducting surveillance activities, added DGs to these efforts, and reorganized their organizational structures to promote a deeper understanding of the member states’ fiscal and economic policies. Using a principal-agent approach this paper explains how the Commission has increased its role in European integration process

EU-Canada Strategic Partnership: Ups and downs

Signed in 1976, the EU-Canada relationship was the first bilateral agreement that the EU signed with an industrialised third country. Modest strengthening of the ties was achieved with the 2004 EU-Canada Partnership Agenda. A fully-fledged free trade agreement was in the works at this time, but suspended in 2006. The EU-Canada strategic partnership agreement (SPA) and the Comprehensive Economic Trade Agreement (CETA) did not materialise until more than a decade later, in 2016. This paper focuses in particular on the strategic partnership dimension. It explores why an SPA was possible in 2016, but not before. To answer this question, the paper looks at four time periods. In so doing it explores the origins of the EU-Canada agreement, how the EU-Canada relationship changed over time, and examines how a more profound strategic partnership came about when it did. In its analysis it considers institutional, domestic and geopolitical factors. It briefly speculates about the possible future of this partnership

The European Central Bank: From a Price Stability Paradigm to a Multidimensional Stability Paradigm

This article maps and explains the shift in economic thinking at the European Central Bank (ECB), i.e., its "ideational" evolution over the past two decades. When the ECB was set up in 1999 its institutional design and epistemic outlook were very much inspired by the legacy of the German central bank, the Bundesbank. Thus, the ECB embraced a "price stability" paradigm that prioritized inflation control. However, over time, policy learning in response to economic shocks (first and foremost, a series of consecutive financial and economic crises from 2008 onwards) and the internal organic evolution of the ECB have led to a shift of economic thinking at the Bank, which has also been reflected by its policy actions. The new paradigm can be characterized as a "multidimensional stability" paradigm. By relying on inter alia secondary literature, speeches, semi-structured elite interviews, and data we collected concerning the previous experience at national central banks of senior ECB staff, we identify a novel causal mechanism for ideational change at the Bank: the change in the composition of senior managerial staff from 1999 onward

The dog that would never bite? The past and future of the stability and growth pact

"Das Papier analysiert die grundlegenden Bedingungen für das Zustandekommen des Stabilitäts- und Wachstumspakts (SGP) und seiner Entwicklung in den Folgejahren. Es werden ökonomische und politische Faktoren untersucht, insbesondere die Rolle wirtschaftspolitischer Vorstellungen und den Einfluss von Experten, Politikern, institutioneller Regelungen im Maastricht Vertrag, innenpolitischer Vorgänge und die Sonderstellung Deutschlands im Bereich der Europäischen Währungsunion. Die gemeinschaftlichen wirtschaftspolitischen Vorstellungen werden als notwendige Bedingung für die Schaffung des Paktes aufgefasst, und ihr Zusammentreffen mit einer entsprechenden machtpolitischen Spielkonstellation wird als dessen hinreichende Erklärung verstanden." [Autorenreferat]"This paper aims to review the economic literature on the Maastricht deficit rule and the Stability and Growth Pact. The author tries to expose the contradictions and inconclusiveness of the debate, highlighting both the criticism and the defense of the fiscal policy regime in EMU. The paper is non-technical and seeks to provide an overview for a readership outside the economics profession. The concluding judgment is that the pact can be criticized on a number of grounds, but that the lack of a politically feasible alternative makes it a second best solution that should not be undermined in the present crisis." [author´s abstract

Chapter 13 Differentiation and the European Central Bank

As the guardian of the euro, the European Central Bank (ECB) oversees a prime example of differentiated integration. Against the backdrop of the multiple crises of the euro’s second decade, this contribution asks how the ECB has dealt with differentiation. It analyses both the historical development of the ECB’s relationship with euro outsiders – discerning between ‘old’ opt-outs and ‘new’ accession countries in the context of EU enlargement – and how differentiation affects ECB policymaking across its various tasks. Specifically, we analyze three logics of ‘deepening’ and ‘widening’: (1) Is the ECB encouraging euro membership among the ‘outs’? (2) Does it seek to reduce the impact of differentiation by keeping the ‘outs’ on board as much as possible? (3) Or does the ECB further cement differentiation by excluding the ‘outs’ from decision-making or deepening integration among the ‘ins’ only? We find that, in the past, the ECB has been hesitant to support ‘more Europe’. When the sovereign debt crisis posed a potentially existential threat, however, the ECB started adopting a more proactive role through both monetary policies and discursive acts. The COVID-19 crisis appears to confirm that the ECB has shed its narrow technocratic focus in order to provide political leadership in the EU. Yet, in our view, this does not suggest that the ECB is a competence maximizer ‘hardwired’ to ever closer union. Rather, the evidence suggests that it merely accepted greater powers and a deepening of integration to avert the threat of (differentiated) disintegration

The Federal Features of the EU: Lessons from Canada

There has been a rise and fall in interest in federalism in the context of European integration. This article assesses the federal nature of the EU. It draws in particular on the work of Michael Burgess who has been one of the key thinkers on this issue. Because there are many types of ‘federalisms’ available across the globe, it is helpful to make a comparison with another political system to offer a base line. In this article I explore to what extent the EU already has federal features. With the help of the work of Burgess I seek to look beyond the specific characteristics of the EU and reflect on how a comparison with this other polity can offer us insights into what is going on within the EU political system. Drawing on the comparison with Canada, I seek to identify the characteristics of the EU that are already those of a federation. Therefore, the guiding question of this article is: compared to Canada, what particular features does the EU have that reminds us of a federation and what features is it still lacking? It finds that the EU has a considerable amount of federal features (federation), but that a federal tradition, a federal ideology and advocacy to a federal goal (federalism) are mostly absent

The European Semester in the North and in the South: Domestic Politics and the Salience of EU-Induced Wage Reform in Different Growth Models*

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