Changing the Rules, Keeping the Players? – The Commission and the Council in EU Fiscal Policy Surveillance

Fiscal policy surveillance, including the possibility to impose sanctions, has been an important feature of Economic and Monetary Union since its inception. The extent to which the Council should be allowed to politically control the European Commission’s surveillance tasks has, however, always been an issue of debate. In the first reform of the Stability and Growth Pact (SGP) that governs the EU’s fiscal surveillance procedures, the rules became more flexible, and the Commission thereby gained a certain discretion in evaluating national budgetary data. This discretion was not withdrawn in the second reform of the SGP adopted in reaction to the euro crisis. Furthermore, with the introduction of Reverse Qualified Majority Voting, the Council needed a qualified majority if it wanted to block the Commission’s decisions on rule enforcement, including sanctions. Formally, the Commission thereby gained power in relation to the Council. However, while formal rules are likely to influence informal power relations between the institutions, an in-depth analysis of cases of decision-making is required to understand how power actually plays out in practice. Given the substantial reform of EU fiscal governance, the altered rules and power relations are likely to have an impact on both the Commission’s and the Council’s strategy in the decision-making process. In addition, the changed institutional setting might affect their chances to shape the outcome according to their preferences. Against this background, this paper will address the question of how changing power relations between the Commission and the Council impact the outcome of fiscal surveillance procedures. Based on a comparative case-study design, this paper will examine the impact of rule change in the area of fiscal policy surveillance on both institutions’ preferences and strategies, and on the formal and informal power relations between them.