In Europe we trust: selecting and empowering EU institutions in disruptive circumstances

Abstract

Over the past decade, the European Union (EU) made significant strides in economic and fiscal policy integration without formal treaty-based changes. After the euro crisis, member states granted the European Central Bank banking supervisory powers. During the pandemic, they entrusted the European Commission with raising EU debt through NextGenerationEurope. This article examines the empowerment of supranational institutions as a deliberate ajustment to disruptive circumstances. By so doing, it demonstrates that empowerment can happen through legislative acts and joint decisions by member states. The study reveals that when states have multiple agent options, like in the banking union, they select the institution they trust the most. Conversely, in nested delegation games, extensive monitoring and reporting requirements, as in the case of NextGenerationEurope, are aimed at avoiding the defection of single member states, what we call ”principal slack”, at the implementation stage.