Public goods, freeriding and excludability in European banking and fiscal policy reforms

During the Eurozone crisis, the EU enacted reforms leading to a drastic delegation of power in banking supervision to a single European supervisor, but only to a low level of integration in fiscal policy coordination. We show that banking supervision and fiscal policy coordination both confronted member state governments with a collective goods problem of endemic freeriding that could be significantly mitigated in the former case but not in the latter. Freeriding rooted in common pool problems could largely be prevented in banking supervision through a supranationalisation that established excludability and network effects making rule abidance attractive and enticing other states to join. In fiscal policy coordination on the other hand, EU member states did not manage to reduce freeriding, as they could not establish excludability or diminish rivalry among themselves through stronger institutions.