New Intergovernmentalism or Technocratic Federalism? The Politics of Budgetary Discretion in the Eurozone

This paper develops an institutional analysis of macro-economic policy coordination in the Eurozone following the overhaul of Economic and Monetary Union (EMU). Existing accounts of EMU reform show that although national governments are increasingly circumscribed in macro-economic policy this has been accompanied by the development of a more Europeanized system of supervision and rule enforcement for fiscal policy (Genshel and Jachtenfuchs 2014). However, to understand how best to theorize changes in the politics of budgetary discretion, the paper examines not just the Fiscal Compact and the European Semester, but also proposals for a European Fiscal Board and National Competitiveness Boards. Hence the empirical analysis explores the balance between “new intergovernmentalism” (Bickerton et al. 2015) and what Habermas (2013) has termed “technocratic federalism” in the new-fangled EMU order. Whereas the former emphasizes the importance of policy coordination by national executives, the latter highlights delegation to expert, unelected bodies. Moreover, there is a different rationale identified with both practices: new intergovernmentalism is designed to limit policy entrepreneurship by supranational actors, while technocratic federalism is intended to insulate policy from electoral inputs. Thus the paper examines both the functioning and the principles behind these different institutional facets of EMU that affect the politics of budgetary decision-making across Eurozone countries. The analysis reveals that the revised architecture of EMU actually offers novel opportunities for supranational and technocratic inputs into national budgetary politics. Yet at the same time, using Italy as a case study, the negotiation of discretion over SGP rules is shown to be an inherently politicized and inter-governmental affair. Seen in this light, EMU reform has not led to a technocratic federalism overseeing ordo-liberalism. Rather, debates over budgetary politics are part of an, at times ad hoc, inter-institutional bargaining that leaves questions of legitimacy unanswered.