EU System Transformation from a Regulatory to a Spending State: Why and How Dimensions of Control Constellations Matter for Spending Governance

After decades of liberalisation and retreat of the state, current crisis responses show a great role of the expenditure state. At the national level, COVID-19 has been fought with massive market intervention, procurement of medical equipment, and large-scale short-term working schemes. The EU has also increased its financial powers with the Recovery Fund and Next Generation EU. These new funds, with other EU off-budget funds and the regular budget, make up the EU's financial resources. Understanding if and how these resources are used is relevant as (re)distribution has increased and is a central prospect for a more strategic EU. With this aim, this paper focuses on the process that lies between negotiating resources in Brussels and their decentralised implementation in member states: the governance of spending. It asks why and how dimensions of control constellations matter for spending governance? Once the Multiannual Framework has been adopted, the Member States install the Commission as intermediary. But the responsible Directorate General (DG) that holds resources and expertise is not free to spend the money, rather actors in other policy areas and in member states control the DG seeking to spend EU money according to their own policy or national interests. This paper assumes that resulting control constellations shape spending governance. It theorizes control constellations along different dimensions: horizontal and vertical, bilateral and collective. Controls are set-up by a programs’ regulation adopted under qualified majority voting (QMV). Vertical controls are conceptualized as instances where an individual member state controls the responsible DG, e.g. through co-financing requirements. We expect that vertical control increases where member state capacity to do good or bad with EU money is strong. Horizontal controls are conceptualized as governance arrangements where (collective) other EU institution control the responsible DG, e.g. conditionalities. We expect horizontal controls to be motivated by inter-institutional conflict or political conflicts of different nature (frugal/ net-payer, right/ liberal party, opponent to ‘friends of cohesion’/ advocate of fiscal risk) and mediated by decision-rules to activate them (unanimity or [qualified] majority). To capture what happens in spending governance and why it matters the paper develops a typology of control constellations. It discusses how they shape the governance of EU spending, how they affect the potential performance of spending as well as the nature of the EU polity. Empirically, the paper draws on a new dataset covering all programs through which the EU spends money in social (14 programs) and industrial policy (21 programs) from 1987 until today. The different control constellations are illustrated with examples of concrete spending programs from the dataset. Analysing the institutions and relationships governing spending promises practical insights on how, when, and why they help or hinder using spending wisely to solve problems and deliver collective goods in a more strategic EU. The paper is part of the multiannual research project “Reconfiguring EU through Spending” (ReSpend) (https://www.polsoz.fu-berlin.de/polwiss/forschung/international/de-fr/Forschung/Projekte/Reconfiguring-EU-through-Spending-_ReSpend_/index.html) Possibly fits into panel EU institutions and inter-institutional relationships.