From Differentiation to uniformity? Fiscal burden sharing during the Eurozone and the Covid-crisis

Conventional wisdom assumes that DI widens over time in a path-dependent fashion. Member states opting-out once are more likely to opt-out again when similar or related policy issues come up for EU decision making. The standard example is EMU which started with differentiation and entrenched differentiation in specific institutional arrangements such as, most importantly, the Eurogroup. The Eurozone crisis added nuance to this picture by mixing differentiated and uniform crisis responses. While the brunt of the crisis response was born by DI instruments including the Greek loan facility, the EFSF and the ESM, there were also uniform responses involving non-Eurozone member states such as the EFSM. The Covid crisis raised many of the issues that had also been salient during the Eurozone crisis, but the policy response was the opposite: the differentiated ESM went practically unused, while the uniform NGEU, modelled on the EFSM, took center-stage. If there was path-dependency at all, it seemed to work in favour of uniformity rather than differentiation. Why did the two institutional trajectories move in opposite directions? By means of an “explaining-outcome” process tracing design, we analyse the marginalization of the ESM and the rise of uniform fiscal burden sharing from the EFSM to NGEU. By so doing, we uncover the causal mechanisms behind the reinforcement of either differentiation or uniformity.