Compensating for European Integration in the Age of Euroscepticism

Various theories have tried to explain the puzzle of continued European integration, especially in policy areas relating to core state policies after the signing of the Treaty of Maastricht, despite multiple crises and growing Eurosceptic political forces. Building on Liberal-Intergovernmentalist bargaining literature we argue that progress in European integration, and increased variation among the member states in the strength of Eurosceptic political forces, are separately and jointly associated with rising differences among them in the extraction of concessions during EU negotiations. We demonstrate this with data on treaty exemptions and fiscal allocations, considering all EU member states 1958-2018. We mostly confirm our expectations, estimating for example that the Treaty of Maastricht increased average variation in annual Operating Budgetary Balances (OBB) among the member states by as much as one billion dollars for every 10 million in member state population, or 0.3 percent of member state GDP; it also increased average variation among them in treaty exemptions by about three core policy areas. We also estimate that increasing Eurosceptic representation in national legislatures increases variation in annual OBB among the member states by an average of 200 million dollars for every 10 million in member state population, or 0.1 percent of member state GDP. The results of our study can help explain how EU integration can proceed even as it becomes increasingly politicized and as Eurosceptic political forces are strengthened. In this, we believe we provide a much needed connection between Post-functionalist literature and LI-inspired bargaining literature.