From the RRF to the SGP: centralization and socioeconomic reform commitments in a new adversarial environment

The coming into force of the recently reformed Stability and Growth Pact (SGP) represents the last iteration of the ever-evolving architecture of EU governance of Member States socioeconomic reforms and could be seen as a return to normalcy after the exceptional phase associated with the Recovery and Resilience Facility (RRF). And yet, we argue that many of the features characterizing the RRF have been incorporated into the new SGP, and the similarity between the two instruments is particularly strong for Member States seeking higher fiscal flexibility. These Member States have negotiated with the European Commission on a series of socioeconomic reform commitments contained within the so-called National Medium-term Fiscal-structural Plans, whose functioning closely resembles the RRF’s own National Recovery and Resilience Plans. If these SGP and RRF’s national plans are similar, we would expect to find confirmatory evidence for a diverse but converging series of theories describing the centralization of socioeconomic reform governance in Member States, in which the Commission and Member States government executives are empowered vis-à-vis other domestic actors, and thus more able to draft national plans reflecting their own reform agenda. At the same time, we also argue that the contextual factors around the RRF and the new SGP are markedly different. While the RRF’s reform commitments were negotiated within a ‘benign environment’ granted by EU joint borrowing in the face of an exogenous crisis; the reform commitments of the new SGP have been negotiated under what we may call an ‘adversarial environment’, in which fiscal rules are being re-introduced at a time in which defence spending is also surging, limiting the fiscal room for socioeconomic reforms. In view of this, this paper poses the following research question: does the SGP further increase the centralization of socio-economic reform governance and does centralization take a different form given the more adversial environment of the SGP? To answer this question, we test the validity of the RRF’s theories of centralization in relation to both the negotiation as well as the content of the reforms contained within the new SGP’s Medium-term Fiscal-structural Plans, in this new adversarial context. In particular, we focus on Italy and Spain socioeconomic reform commitments. We rely on data gathered through interviews with domestic and EU policymakers as well as official documents and news agencies. By exploiting the similarity between the RRF and the SGP’s national plans together with diverging contextual conditions, our paper contributes to development of a more robust middle range theory of EU governance of domestic reforms.