The Politics of the Eurozone Budget and the European Stability Mechanism

Is the European Stability Mechanism stuck outside the EU? And have attempts to build a eurozone budget stalled for good? This paper examines negotiations on the eurozone budget and the ESM's status within the eurozone architecture to test competing expectations on how national governments respond to pressure to build new common institutions and capacities, and bring them inside the EU (where they are outside). It contrasts expectations from liberal intergovernmentalism, neofunctionalism and the failing forward framework that marries components of the two, and then presents research on the domestic preferences of key Eurozone countries and institutions about the status of the ESM and of the Eurozone budget. It shows that while institutions develop over time as they are needed, that the politics of producing them ensure that some institutions fail to develop, or develop in a stunted fashion. The result is a highly skewed eurozone architecture.