Minor Changes, Major Consequences? How the Procedural Rules of the New European Economic Governance Regime Affect the Asymmetry Between Liberalization and Social Regulation in the EU

Friday, 3 July 2015: 2:15 PM-3:45 PM
TW1.1.04 (Tower One)
Daniel Seikel, Institute for Economic and Social Research (WSI) in the Hans-Böckler-Foundation, Düsseldorf, Germany
Focusing on institutional and political economic consequences of the new voting procedures of the reformed European Economic Governance Regime, this paper analyzes how the apparently merely technical introduction of reversed qualified majority voting within the reformed Excessive Deficit Procedure shifts the balance not only between the European Commission and the member states but also between liberalization and social regulation, thereby structurally promoting policies that reinforce social inequality in the EU.

Many observers of the EU crisis management have interpreted the reform measures following the outbreak of the crisis as a comeback of intergouvernmentalism. According to this interpretation, member state control has been tightened, thus weakening the position of supranational institutions, especially of the Commission and the European Parliament. In contrast to this widespread perception, the institutional analysis of the new European Economic Governance Regime carried out in this paper reveals that rather the opposite is true: while the crisis management might have been dominated by the member states, the reform of the Stability and Growth Pact (SGP) has substantially strengthened the power of the European Commission, providing it with an almost autonomous executive law-making competence.

The argument of this paper is that the introduction of reversed qualified majority voting for decisions within the Excessive Deficit Procedure has not only important institutional implications but also manifest political economic consequences. As argued by Fritz Scharpf, the institutional architecture of the EU systematically produces an asymmetry between market-making and market-correcting regulations, leading to an imbalance between liberalization and social regulation. Until the crisis, this imbalance rested primarily on an asymmetry between political and judicial decision-making. The reason for this asymmetry is the sweeping momentum of integration through law in contrast to the cumbersome political decision-making process of European legislation. Since integration through law is always market-making, only political decision-making can bring about market-correcting outcomes. Although European legislation can also be market-making, liberalization policies have to overcome the same high majority thresholds as social regulations. The new European regime of Economic Governance deepens and institutionally consolidates this imbalance between liberalization and social regulation. First, Commission and ECJ, both in general liberalization-friendly, obtain additional competences. Secondly, the reform of the SGP has exclusively simplified the enforcement of austerity, promoting liberalization policies such as privatization, welfare retrenchment, wage cuts in the public sector, deregulation of labor markets, decentralization of collective bargaining systems etc. However, the high majority thresholds for market-correcting regulations have not been lowered. Thus, the new voting rules included in the Six Pack and the Fiscal Compound extend the asymmetry between market-making and market-correcting to the area of political decision-making. In doing so, the new European Economic Governance Regime subordinates economic and social policies to the primacy of strict austerity.