Regime and Learning Shifts in Fiscal Policy Coordination under Economic and Monetary Union

Abstract

This thesis analyses twenty years of fiscal policy coordination under Economic and Monetary Union (EMU) – its genesis, implementation courses and changes. It does so by resorting to the construct of learning as an ontological trait of policy making and employing modes of policy learning (intended as distinct causal mechanisms) to operationalise this ontology for the sake of empirical investigation. To this end, a “policy learning measuring instrument” has been constructed allowing for the categorisation of each case study in terms of their prevalent mode of learning and then for the testing of mode-specific expected implications. From a methodological point of view, the thesis relies on theory-testing process tracing and evidentiary eclecticism to verify mode-specific observable implications. Throughout its history, the supranational coordination of fiscal policies under EMU has been characterised by three distinct regimes. The first one was substantiated by the fiscal criteria of Stage II of EMU (in force during the period of 1994-1998). The prevalent mode of learning under this regime was hierarchical. In terms of outcomes, that mode led to instrumental learning that sustained the process of convergence. The launch of the euro and the adoption of the Stability and Growth Pact (SGP) substantiated a new fiscal policy coordination regime that lasted until 2010. Under the SGP, learning took place as a by-product of bargaining and reinforced strategic and opportunistic implementation. The financial crisis of 2007/2008 led to a de facto abeyance of the SGP and to its overhaul from 2010. Within this episode of policy change two case studies were distilled, one of emergency-driven, intracrisis management and one of long term, institutional change. While the first case was explained through a mechanism of contingent learning, the second one was crucially found to be driven by epistemic forces. The findings arising out of this study are conversant with different strands of the literature and, in particular, seek to contribute to the political economy of the E(M)U and to integration theories at large.