Amy Verdun

The dog that would never bite? What we can learn from the origins of the Stability and Growth Pact

This article analyses the creation of the Stability and Growth Pact. It 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. It concludes that a set of commonly held beliefs together with a corresponding power-political constellation explain the creation of the SGP. As these parameters change, they inform our understanding of the current crisis.

Banks and the False Dichotomy in the Comparative Political Economy of Finance

The wide-ranging varieties of capitalism literature rests on a particular conception of banks and banking that, the authors argue, no longer reflects the reality of modern financial systems. They take advantage of the greater information regarding bank activities revealed by the financial crisis to consider the reality, across eight of the world’s largest developed economies, of the financial power of banks to act as bulwarks against market forces. This article offers a marketbased banking framework that transcends the bank-based/capital market–based dichotomy that dominates comparative political economy’s consideration of financial systems and argues that future cpe research should focus on the activities of banks. By demonstrating how market-based banking increases market influences on the supply of credit, the authors highlight an underappreciated source of financial market pressure on nonfinancial companies (nfc s) that can have a potential impact across the range of issues that the varieties of capitalism (VoC) literature has seen as differentiating national systems. This approach has implications in areas such as labor, welfare, innovation, and flexibility.

A historical institutionalist explanation of the EU's responses to the euro area financial crisis

ABSTRACT How can we understand the European Unions responses to the euro area financial crisis? This contribution examines this question through a historical institutionalist (HI) lens. First it reviews the design of existing institutions. With the help of HI it examines what challenges the institutional design posed on the European Union (EU) when the crisis hit. Next, the responses to the crisis by member state leaders and by EU-level actors are reviewed. An analysis is made of selected new EU institutions created to address the crisis: the European Financial Stability Facility; the European Stability Mechanism; the Six-Pack and Two-Pack; the European Semester; and the Fiscal Compact. Four ideal types – ‘displacement’, ‘layering’, ‘drift’ and ‘conversion’ – are examined and found not to fit well. In some cases institutions were ‘layered’ on top of existing institutions. Perhaps an amendment could be made by offering the ideal type ‘copying’ in those cases where new institutions that borrow from earlier institutions. Although no complex problem can be truly understood by looking at it through one single theoretical lens, this contribution argues that a large of part of the problems that emerged, and the solutions adopted, can be understood by examining it through an HI lens.

The Institutional Design of EMU: A Democratic Deficit?

The introduction of the euro is accompanied by an independent European Central Bank (ECB) which is solely responsible for monetary policy in the euro zone. No European institution will be introduced to flank the ECB. This particular institutional design is problematic. This article argues that Economic and Monetary Union (EMU) suffers moderately from a democratic deficit. However, the case of Germany illustrates that it is not the independence of the ECB that should be cause for concern, but the absence of specific domestic features and a government. It is unclear which political authority will be held responsible if EMU leads to an uneven distribution of costs and benefits across the euro zone. Economic literature suggests that under EMU distortions could well occur and that a different design could deal better with these imperfections. The historical process leading to EMU explains the reasons for its particular design. Although imperfect, EMU is an improvement over the pre-EMU status quo in which Germany de facto dominated monetary policy. Nevertheless, the design of EMU remains suboptimal. The prospect of creating an Economic and Monetary Union (EMU) in the European Union (EU) has left academics, citizens and politicians of the Member States wondering whether democratic accountability will be sacrificed. In particular the fact that a politically independent European Central Bank (ECB) has been established, with the sole mandate of safeguarding price stability, has led to considerable concern. This feeling of apprehension towards the creation of this new institution and new type of policy-making in the European Union has, of course, been more widespread in those countries with a tradition of central bank accountability to the national parliament, such as the

The Stability and Growth Pact - Theorizing a Case in European Integration

This article looks at the Stability and Growth Pact (SGP) as a case study in European integration. Applying the theoretical lenses of various European integration approaches (intergovernmentalism, domestic politics, neofunctionalism and an ‘expertocratic’ approach) it seeks to explain the creation of the SGP as well as its subsequent implementation. The findings show that these approaches are able to illuminate different parts of the process. The article thus argues that only an eclectic combination of the approaches provides a satisfactory theoretical explanation of the SGP as a fundamental element of the rules-based economic and monetary union (EMU) regime.

Strengthening the European Commission's budgetary and economic surveillance capacity since Greece and the euro area crisis: a study of five Directorates-General

ABSTRACT Has the executive role of the European Commission changed since the euro area 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 article examines how the Commission has responded to the expansion of fiscal and economic rules such as the regulations that strengthen the EUs statistical competence and the Six-Pack and Two-Pack. Based on interviews conducted with key staff, we find that these rules have created significant co-ordination, information and analytical demands on the Commission. The latter has enhanced its horizontal and vertical co-ordination 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 article explains how the Commission has increased its role in European integration process.

EMU's teenage challenge: what have we learned and can we predict from political science?*

We review the initial predictions and claims regarding economic and monetary union (EMU) in Europe against the evidence of its first ten years of existence. We argue that pessimistic views on the creation of EMU have proved to be wrong. Yet EMUs success is rather puzzling, since it is based on a peculiar institutional structure not thought to lead to success. EMU has generated redistributive effects and may have increased business-cycle synchronization. Those effects have not translated into the expected decrease of legitimacy or a widespread democratic deficit of EMU. At the institutional level, EMU has coped well with an asymmetric framework, largely decoupling EMU from political union. There have been neither major spill-over effects pushing for further political integration nor conflict and disintegration. The main question for the future is whether this institutional structure will stay the same in the aftermath of the global financial crisis.

From neighbourhood to membership: Moldova’s persuasion strategy towards the EU

Moldova is complying with the European Neighbourhood Policy (ENP), the new framework of partnership with neighbouring countries that was created by the European Union (EU) in 2005. The ENP prompted in the partner countries a process of convergence with EU rules. The ENP‐promoted legislation convergence in the Eastern partner countries can therefore be a first step to the enlargement of the EU to Former Soviet Union Republics (FSURs) such as Moldova, even if it is generally understood that such enlargement is not yet on the cards. In this article we analyse whether the ENP‐prompted process of convergence of the Moldovan legislation with the EU rules (law, institutions, and practices) increases this country’s chances of EU membership. We argue that this process of convergence is in many ways similar to compliance with the Copenhagen convergence criteria. Moldova might be able to achieve EU candidate status sooner than is currently expected.

The building of economic governance in the European Union

This article seeks to shed light on the development over the past decades of the concept of economic governance. It asks what is understood by economic governance and what role the social dimension has played. The article offers an analysis of the problems and possible issues confronting the EU as it seeks ways to address the sovereign debt crisis by embarking on deeper economic integration. The article concludes that from the early days there have been questions about the exact interaction between economic and monetary integration and thus between ‘economic’ and ‘monetary’ union. Despite Delors’ original inclination, few were willing to establish any linkage between EMU and social matters. The crises have again brought out the need to consider the two in tandem. Moreover, with the increased role in economic governance accorded to EU-level institutions, there is a need to rethink the EU democratic model.

Decision-Making before and after Lisbon: The Impact of Changes in Decision-Making Rules

This paper examines the institutional rules and the decision-making process in the European Union before and after the Lisbon Treaty. What challenges did the EU respond to that ultimately led to the Lisbon Treaty? What institutional changes were made? What has been the outcome of these changes? If we look at these results through various European integration theory lenses, what can we learn? To address these questions the paper is structured as follows. The first section introduces the issues. The second examines the challenges to which Lisbon was supposed to be the answer. Section three examines the institutional and decision-making changes that were made by means of the Lisbon Treaty. Section four offers an assessment as to what effects the Lisbon changes have had to date. The fifth offers an analysis that draws on European integration theories to make sense of the findings. The final section concludes.