Reinforcing Europe’s failed fiscal regulatory state

Abstract

Fiscal governance in the EU is an exemplary case of the regulatory state; the EU governs member states’ fiscal and public policies through rules rather than expenditure. The weaknesses of the EU fiscal regulatory state were apparent to observers from before the introduction of the Euro, and were exposed in the financial crisis. EU leaders have nonetheless redoubled their commitment, expanding the range of policies subject to the fiscal regulatory stage, its intrusiveness into member state policies, and the penalties for noncompliance. We review and analyze them and conclude that there is a high risk that the EU fiscal governance will further increase the intrusiveness and unpopularity of the EU without disciplining member states or markets.