The European Council as Crisis Manager and Fusion Engine: Explaining the EU’s Fiscal Response to the Covid-19 Pandemic

The European Union’s (EU) reaction to the Covid-19 (corona) pandemic has highlighted the pivotal role of the European Council in the EU’s institutional architecture and development. After five days and four nights of negotiation, the European Council’s Conclusions from July 2020 created the Next Generation EU (NGEU) recovery package. NGEU represents the Union's most important instrument to cope with the economic, fiscal, and political challenges posed by the corona crisis. Scrutinizing the different phases of a classical policymaking cycle (preparation, decision, implementation, control), this paper shows the European Council’s key activities in each stage. As a comprehensive instrument relying on common debt and direct financial transfers, NGEU involves different EU institutions and close links between EU and national levels of government. The European Council thus acted as the driver of a horizontal and vertical fusion of responsibilities. Horizontally, the European Council called and partly relied on the expertise and competences of other EU institutions for the drafting and adoption of the recovery package. Vertically, complex implementation structures require close coordination between EU-level actors and national administrations, with the European Council serving as the court of last appeal. The result is an increasingly complex system of governance. On the upside, this implies a sharing and pooling of responsibilities. More problematically, however, the European Council, despite being exempted from any legislative function by the EU treaty, constantly interfered in a very detailed manner in the policymaking process. Building on numerous different sources including policy documents, EU legal acts, and interviews with civil servants and decision-makers, this paper addresses two gaps in the existing literature in particular: First, despite its central position within the EU system and the unique political authority of its members, the European Council often has been given only secondary attention compared to other EU institutions. Second, existing literature on the corona crisis so far has focused on specific events such as the July 2020 European Council meeting. This paper, by contrast, analyzes the realization of the recovery package over an entire period ranging from early 2020 to early 2021. Moreover, it critically assesses the European Council's performance with respect to political leadership, legal certainty, and democratic control. The success (or not) of NGEU will be crucial for the role of the European Council and for the Union’s future activities in other key policy fields as well.