EU versus core state powers: the customization of European Union fiscal policy

This paper analyzes the customization of European Union fiscal policy by three member states and how it is shaped by the interplay of EU and domestic level factors. Member state compliance with EU regulatory policies has been a core concern of EU implementation scholarhsip. However, EU integration has also led to EU competencies in areas that are traditionally conceived of as “core state powers”, such as fiscal policy. These policies aim at some reasonable level of member state coordination, while maintaining leeway for diversity. Given the high political salience of fiscal issues, the relatively immature state of EU fiscal policy with associated high levels of discretion for member states, and the fact that this is a traditional stronghold of national competence, we would expect member states to seek to adapt and interpret EU fiscal rules when implementing them. This paper asks: how and why do member states customize EU fiscal rules during implementation? We analyze how member states’ macroeconomic situation, fiscal policy positions, domestic veto players, and the influence of the European Commission concerning the (threat of) Excessive Deficit Procedure on MS when overseeing and enforcing implementation work and interact in bringing about specific implementation outcomes. Using crisp-set Qualitative Comparative Analysis (csQCA), we analyze the implementation of Council Directive 2011/85/EU on requirements for budgetary frameworks of the Member States in Italy, Germany, and France. The paper contributes to EU policy implementation research by extending the study of customization to a new policy area and illuminating the two-level games underlying customized implementation outcomes when a “core state power” is concerned.