The European Parliament and the eurozone crisis: An exceptional actor?

Abstract

The eurozone crisis has reinvigorated the debate over the requirement for supranational integration within the single currency area. With the focus of political scientists often restricted to the study of intergovernmental processes of crisis management, this article considers the role of the European Parliament during the key legislative negotiations on European Union fiscal governance reform. A comparative frame analysis of the major European Union institutions’ crisis discourse is applied. Frames are linked to macroeconomic ideology as well as to different integration scenarios within Economic and Monetary Union. It is found that the European Parliament converged around limited framing devices supporting intergovernmental fiscal discipline. Key explanatory factors here were the ideological divisions among Members of the European Parliament as well as the leadership role played by the European Council. These findings are broadly consistent with the new intergovernmentalist claims that the supranational institutions are no longer hard-wired to the pursuit of supranational integration.

Keywords

European Parliament eurozone crisis fiscal governance intergovernmentalism ordoliberalism supranationalism

Introduction

The focus of this article is on the neglected role of the European Parliament during the eurozone crisis and its influence in shaping the main legislative initiatives introduced to reform the European Union’s (EU) fiscal governance framework. Within the field of political science, the EU’s institutional response to the crisis has been used as evidence to support the rise of the so-called ‘new intergovernmentalism’ (Bickerton et al., 2015, 2015a). At the heart of this new approach to the study of European integration in the post-Maastricht phase is the claim that member states are led to ‘pursue more integration but stubbornly resist further supranationalism’ (Puetter, 2012: 168). When applied to the eurozone crisis, the focus has been on the shift in decision-making that is said to have taken place away from the classic Community method in favour of intergovernmental policy coordination (Fabbrini and Puetter, 2016). The implied assumption from such theorising is that the EU’s supranational actors have been relatively weakened in terms of their executive power and legislative influence.

In several respects, the role of the European Parliament during the eurozone crisis provides a challenging case study for the new intergovernmentalism. First, it is a notable coincidence that the ratification of the Lisbon Treaty coincided with the intensification of the financial and economic crisis in Europe. The Treaty provided a significant boost to the European Parliament’s role in Economic and Monetary Union (EMU), where traditionally it was limited to a series of supervision and consultation privileges. The European Parliament was made ‘co-legislator as regards the setting of detailed rules for multilateral surveillance’ (Article 121(6) TFEU), and it is now ‘consulted on secondary legislation implementing the excessive deficit procedure’ (Article 126(14) TFEU). The European Parliament was therefore able to act as a full co-legislator in the adoption of the so-called ‘six-pack’ and ‘two-pack’ secondary legislative acts and was afforded limited participation in the negotiation of an overlapping intergovernmental treaty on a ‘fiscal compact’. Moreover, the European Parliament is also unique in its ability to apply normative arguments concerning its role in conferring democratic legitimacy onto a more deeply integrated single currency area in order to strengthen its own role in EMU (Rittberger, 2014; Rittberger and Schimmelfennig, 2006). Finally, the reforms specific to EU fiscal governance have also taken place against a wider expansion of the European Parliament’s viability, status, and legislative power across a number of policy competencies (Hix et al., 2007).

This article is sympathetic to the role of ideas and discourse in the study of EMU (Dyson, 2000; McNamara, 1998). A frame analysis is applied to the European Parliament’s eurozone crisis reform negotiations on the six-pack and two-pack secondary legislation approved through co-decision and in the adoption of the intergovernmental fiscal compact treaty which took place outside of the Community method (Goffman, 1974). As a comparative endeavour, the analysis is also focused on frame construction and interactive processes within the EU institutions – European Council, Council, Commission, and European Central Bank (ECB) – as they negotiated with each other to formulate a crisis response. The different policy frames (‘problem’ and ‘solution’) emerging during the key legislative negotiations are uncovered. In turn, frames are linked to two models of fiscal integration: intergovernmental and supranational.¹ In addition to facilitating a clarification of the different economic and political policy options for reforming the single currency area, the key role of macroeconomic ideology in guiding policy solutions and in informing different integration paths within EMU are key aspects here.

Theoretical discussion

Exposed by destabilising economic forces, the incomplete EMU framework institutionalised at Maastricht could have been expected to give rise to functional and political ‘spillover’ and finally a demand for centralised economic integration (Vilpišauskas, 2013). However, when political scientists have explored the political dynamics of the eurozone crisis, it has more often figured as a test case to support the claims of the ‘new intergovernmentalism’ (Bickerton et al., 2015, 2015a). Importantly, far from resisting the drift towards more intergovernmental modes of decision-making, Bickerton et al. (2015: 712) argue that the supranational institutions have been complicit with these developments: ‘supranational institutions are not hard-wired to seek ever-closer union’. Instead they act ‘strategically’ rather than idealistically: ‘when faced with a favourable environment for entrepreneurialism they may well take advantage of it, but in a more hostile environment, they avoid putting forward proposals that stand little chance of success’. While evidence has been provided that the Commission acted ‘strategically’ during the eurozone crisis by tempering its supranational reform ambition (Warren et al., 2017) the new intergovernmentalism has remained more ambivalent about whether this logic can be extended to the European Parliament (Schimmelfennig, 2015: 724).

Relevant at this point is the literature on supranational entrepreneurship, which tries to theorise the conditions required for successful entrepreneurial activity.² Historically, this literature has often been limited to structural explanations (Hodson, 2013) – focusing on either liberal intergovernmentalist accounts, emphasising domestic preference formation and interstate bargaining (Moravcsik, 1999) – or more nuanced principal–agent frameworks theorising the conditions of delegation and control (Pollack, 2003). While early neo-functionalism allows more room for supranational agency as an element of spillover (Haas, 1968), it still assumes a fixed preference for advancing centralised integration. To account for the lack of supranational entrepreneurship observed by the Commission during the financial and economic crisis, Hodson (2013) has combined traditional structural explanations with that of agency. The first refers to the strategic actorness of the Commission and its reluctance to support initiatives unless they stand a chance of success. The second appeals to the partisan leanings within the EU executive, which means preferences other than the pursuit of closer integration took hold in some cases.

Despite the recent extension of co-decision in EMU, there is a strong possibility that similar constraints may have led the European Parliament to adapt its integration preferences during the eurozone crisis. With regard to structure, the intensified crisis management role of the intergovernmental institutions led to key reform policies being introduced through the circumvention of the Community method with only limited parliamentary oversight (Fabbrini and Puetter, 2016). Moreover, while other legislative acts were introduced via co-decision with the full participation of the European Parliament, the strong agenda-setting role of the European Council during the negotiation process has still been noted (Bressanelli and Chelotti, 2016). In terms of agency, the European Parliament is divided along ideological lines, and party competition and the behaviour of coalitions have historically been driven more by partisan policy preferences than a commitment to increased integration (Hix et al., 2007). Ideological cleavages have also been found to be heightened on economic policy issues with redistributive implications (O’Keeffe et al., 2016), although this has not prevented Members of the European Parliament (MEPs) from trying to secure common institutional interests to strengthen the role and influence of the European Parliament over the governance of EMU (Rittberger, 2014).

Underpinned by a discursive institutionalist approach, a frame analysis will be applied to the European Parliament’s negotiations on the six-pack, two-pack, and intergovernmental fiscal compact treaty. This analysis will seek to test the key hypotheses laid down by the new intergovernmentalism: (H1) ‘Supranational institutions are not hard-wired to seek ever-closer union’: (H2) Rather these institutions ‘act strategically’ as opposed to idealistically. In addition to allowing for agency-centred explanations of partisan ideology and common interests in conditioning framing activity, this approach is also sensitive to structure and the changing institutional dynamic in which the European Parliament operates.

Methodological framework

A discursive institutionalist perspective is applied here through a frame analysis (Crespy and Schmidt, 2014). Discursive institutionalism classifies ideas within frames at three different levels of generality: (1) policy ideas related to policy measures, (2) programmatic ideas related to broader policy paradigms and macroeconomic ideologies, and (3) normative ideas which attach value to political action (Schmidt, 2008, 2014). Discursive institutionalism is also attentive to the ‘formal’ institutional context – developed as part of historical institutionalist explanations – which is understood as giving shape to discursive interactions (Schmidt, 2015). This approach is applied through a sociological frame analysis, which is evolved from the work of Goffman (1974). For Goffman (1974: 21), a frame is understood as a ‘schemata of interpretation’ that enables individuals to create meaning and, in turn, influence political behaviour. Drawing on this definition, Benford and Snow (2000) make an important distinction between ‘diagnostic’ and ‘prognostic’ framing. Applied to the eurozone crisis, this demands a focus on the frames used to define the crisis problem, as well as the interconnecting policy ideas proposing a solution to solve or manage the crisis.

Building on the literature, a wider review of the competing frames that are likely to figure in the institutional discourse on the eurozone crisis has been completed (see section ‘Competing frames of EMU integration’). Table 1 provides a visual overview of the different categories of frame made up of policy ideas attributed to problem and solutions (for example, strengthened rules-based surveillance vs debt mutualisation), programmatic ideas related to broader macroeconomic ideology (for example, ordoliberalism vs Keynesianism), and normative ideas that underlie political action (for example, fiscal discipline vs fiscal solidarity).³ An important aspect here is the theorised link between macroeconomic ideology and different integration scenarios within EMU: ordoliberalism with intergovernmentalism and Keynesianism with supranationalism. Shifts in macroeconomic paradigms alone cannot explain differentiated integration in the single currency area (Leuffen et al., 2013). However, applied to the eurozone crisis, while ordoliberalism can be drawn on to reinforce existing policy solutions building on the decentralised Stability and Growth Pact (SGP) framework, a Keynesian philosophy is able to guide new policy solutions implementing centralised fiscal transfer mechanisms. Finally, as an interpretative approach, the analysis involves a qualitative discourse analysis conducted to determine the relative salience of frames in the above categories (Crespy and Schmidt, 2014).

Table 1.

Framing fiscal governance reform.

	Fiscal integration	Political integration
Intergovernmental reform model	Problem frame: The crisis is framed as a problem of excessive fiscal profligacy among periphery member states Solution frame: Policy ideas building on the pre-existing rules-based SGP framework Normative ideas of fiscal discipline and sound money and finance Guided by the macroeconomic ideas of ordoliberalism	Limited political frames. A continued reliance on indirect legitimacy via representative of member states in the Council and European Council
Supranational reform model	Problem frame: The crisis is framed as a balance-of-payments problem resulting from the accumulation of private debt Solution frame: Policy ideas implementing a centralised pooling of fiscal resources through debt mutualisation schemes and/or the development of an enlarged EU budget function Normative ideas of fiscal solidarity Guided by the macroeconomic ideas of Keynesianism	Problem frame: Problem of accompanying fiscal integration with sufficient channels of democratic legitimacy and accountability Solution frame: Policy ideas in the form of the development of a flanking political union aspect, via a strengthening of the European Parliament Normative ideas promoting supranational representative democracy and the role of the European Parliament in conferring democratic legitimacy

SGP: Stability and Growth Pact; EU: European Union.

Building on (Warren, 2017).

In terms of timing, the analysis spans from early 2010 to the middle of 2013, when the risk element associated with sovereign default and contagion was at its most acute. The focus is on the construction of frames and interactive processes within the European Parliament alongside the EU institutions – European Council, Council, Commission, and ECB – during the passage of the six-pack and two-pack legislation approved by co-decision and in the adoption of the intergovernmental fiscal compact treaty. While the European Parliament was heavily involved in the passage of the legislative procedures by co-decision through the formal trialogue meetings completed by the Economic and Monetary Affairs Committee (ECON Committee), its role was limited for the fiscal compact to informal dialogue as part of its participation in an ad hoc working group. Frames are uncovered from multiple primary and secondary data sources. This includes policy documents (legislative and non-legislative), press releases, and speech acts following the institutional negotiation phases from their initial proposal through to their amendments and conclusion. Embedded within the analysis will also be five elite-level interviews with senior members of the ECON Committee, alongside eight elite-level interviews with officials located in the European Council, Economic and Financial Affairs Council (ECOFIN Council), and Directorate-General for Economic and Financial Affairs (DG ECFIN). The interviewees were chosen based on their seniority and proximity to the reform negotiations taking place during the most intense phases of the eurozone crisis.

Competing frames of EMU integration

Policy ideas

At the time of its establishment, a common critique of the European single currency area was that the monetary union lacked a common fiscal capacity to protect against asymmetric shocks and structural imbalances (Verdun, 1996). Following the onset of the eurozone crisis, there have been fresh calls by mainstream economists to align fiscal policy responsibilities at the European level (Baldwin et al., 2015; De Grauwe, 2013). At the level of policy ideas, a distinction can be made between existing solutions building on the decentralised SGP framework and new solutions implementing centralised fiscal transfer mechanisms. The SPG in both its original form in 1997 or in its reformed shape in 2005 has been criticised by economists for its ‘one-size-fits-all’ rules and procyclical bias (De Grauwe, 2016). However, building on the Maastricht legacy through reinforced fiscal surveillance and enhanced budgetary enforcement can be done with relative political ease via secondary legislation. While the narrative that the intensification of the crisis in Europe resulted from fiscal profligacy in Spain and Ireland (but not Greece) has been explicitly rejected (De Grauwe, 2013), existing policy solutions strengthening the SGP can be linked to a behavioural diagnosis of the crisis (Blyth, 2013). Alternatively, new policy solutions activating fiscal transfers have generally concerned two possible mechanisms: (1) debt mutualisation and financial risk sharing instruments (Bofinger et al., 2011), and (2) the development of an EU fiscal capacity with a mixture of redistributive and stabilisation functions (Wolf, 2012). These new policy ideas can be traced back to the early scepticism over the ‘asymmetrical nature’ of EMU (Verdun, 1996) and can also be linked to a deeper structural diagnosis of the eurozone crisis involving the accumulation of private debt and problems of regional imbalances (De Grauwe, 2013).

Macroeconomic ideology

While the intergovernmental nature of EU fiscal governance can be attributed in part to the national interest concerns of member states (Verdun, 1996),⁴ different integration scenarios within EMU can also be understood as being conditioned by broader macroeconomic ideology (Hall, 2014). The dominant paradigm guiding existing policy ideas within EMU is ordoliberalism (Blyth, 2013). Governed by German economic policy ideas of ‘sound money and finance’ (Dyson, 2000; McNamara, 1998), this approach maintains that governments should regulate markets in order to secure competitiveness while opposing expansionary fiscal or monetary intervention into the normal course of the economy for stabilisation purposes (Dullien and Guérat, 2012: 2). Championed by the German Finance Ministry and Bundesbank, ordoliberals prioritise subsidiarity in economic policy and individual member state responsibility for growth and employment, as well as for implementing ideas from the ‘stability culture’ (Dyson, 2002: 178). Consistent with the ‘own house in order’ principal, this mindset became internalised in an intergovernmental fiscal governance framework backed with a no-bailout clause and a monetary financing prohibition (Dyson, 2014). Circumventing the need for a supranational fiscal policy, budget deficits are understood as the only area in which an external constraint is required because they can undermine the price stability objective and lead to demands for a bailout through unwanted fiscal transfers (Dullien and Guérat, 2012: 3). The evolution of EMU has been found to be a highly path-dependent process. Following the eurozone crisis, ordoliberalism could therefore be used to reframe existing policy solutions building on, rather than replacing, the intergovernmental framework for fiscal discipline implemented at Maastricht.

Demands for a supranational fiscal policy could be reinforced by the high interdependence exacerbated by the eurozone crisis (Schimmelfennig, 2015a) or from a recognition of the failure of intergovernmental policy coordination to guarantee stability (Leuffen et al., 2013). However, new policy ideas for supranational fiscal integration within EMU can also be understood as being guided by a contrasting ideology to ordoliberalism: Keynesianism. This tradition is characterised by a belief in the possibilities for government intervention to stimulate aggregate demand in order to boost growth and employment (Skidelsky, 1992). Unlike the ‘stability’-oriented ordoliberal tradition, Keynesian economic theory is more amenable to a supranational fiscal policy in a monetary union and a level of coordination that goes beyond the control of budget deficits (Dullien and Guérat, 2012: 5). Proponents of Keynes argue that a fiscal transfer mechanism could use the capital of current account surplus countries to uphold aggregate demand in the eurozone, which would in turn help rebalance diverging current account positions and provide an important shock absorption function (Pasimeni, 2015). While a demand stimulus can be administered by national governments under normal conditions, within the eurozone framework a lack of a liquidity guarantee provided by a ‘lender of last resort’ can force member states to turn off their budgetary stabilisers (De Grauwe, 2013: 9). The earliest blueprints for the single currency area advanced in the Werner report (1970) and the later MacDougall report (1977) reflected the continued influence of Keynesianism. In more recent times, led by dirigiste France, new policy ideas for the mutualisation of debt and an enlarged EU fiscal capacity have been reasserted as possibilities through normative claims of European ‘solidarity’ (Crespy and Schmidt, 2014). Framed by a Keynesian ideology, these new solutions could reduce the asymmetry within EMU by aligning fiscal and monetary policy at the supranational level.

Political frames

The direction of fiscal integration has important political implications related to the problem of ensuring an appropriate level of democratic legitimacy. Historically, EU fiscal governance has relied on indirect forms of legitimacy via representatives of member states in the Council and European Council (Dyson, 2000; Maurer, 2013). While some authors have defended the indirect democratic mechanisms (‘checks and balances’) underpinning the current EMU set-up as being equivalent to these at the national level (Moravcsik, 2009), there are others who argue that ‘we must tame the tiger’ by submitting such government to proper democratic control (Collignon, 2011). However, moves towards a supranational fiscal policy may not be possible without a centralised political solution. This is because while ‘pareto-improving’ policies can be legitimised through their results only, explicitly redistributive policies require more procedural legitimacy in order to ensure citizen compliance (Scharpf, 2003). In this context, the European Parliament has been observed to be generally successful in employing normative arguments concerning its own role in conferring democratic legitimacy and accountability in order to advance supranational parliamentarianism (Rittberger, 2014; Rittberger and Schimmelfennig, 2006).

Framing EU fiscal governance reform

Six-pack

In March 2010, the eurozone periphery suffered a dramatic loss of market confidence following a series of upward revisions to the statistics on the Greek government deficit figures for 2009 from an estimated 12.7% of gross domestic product (GDP) to 13.6% of GDP. Commenting on these events later, the President of the European Council, Herman Van Rompuy, acknowledged that the ‘loss of confidence in government bond markets provoked by the Greek crisis in early 2010 was a real shock for which we were not prepared’ (Council, 2014). These events led to President Van Rompuy putting together a case for the supremacy of the European Council–led Task Force in guiding EMU reform, which permitted the President ‘direct oversight’ over a broad institutional membership (Puetter, 2014: 116–118). While MEPs protested that they should be more closely involved with the work of the Task Force in order to ensure the ‘democratic legitimacy’ and ‘transparency’ of the process, the European Parliament was excluded from this important crisis management forum (European Parliament, 2010b).

The prominence of the Task Force in guiding the early reform negotiations ensured the European Council a prominent role in framing the crisis. Moreover, as the largest and most wealthy member state, it was Germany with its ordoliberal preferences that was able to lead discussions within this intergovernmental forum (Fabbrini, 2015). As one Council official noted, ‘In view of its economic size … Germany automatically was seen to take on a leading role, whether it wanted it or not’ (Council Directorate for Economic Policy Official, 2013). This can be compared with the economically weakened position of France under the leadership of President Nicolas Sarkozy who, as the crisis progressed, was forced to abandon many of his Keynesian policy ideas for increased fiscal solidarity in favour of Germany’s more limited fiscal discipline objectives (Advisor to the Cabinet of the European Council President, 2014, Interviewed by the author (Brussels, 4 April). Senior advisor to the President; see also Crespy and Schmidt, 2014). Buoyed by Germany’s ideational leadership, the crisis was able to be reframed by the Task Force as a problem of fiscal profligacy. In an emergency statement issued by the Task Force on 11 February 2010, it was underlined that ‘all euro area members must conduct sound national policies in line with the agreed rules’ (Council, 2010). The Greek administration was also singled out and called on ‘to implement all these measures in a rigorous and determined manner to effectively reduce the budgetary deficit by 4% in 2010’ (Council, 2010).

With a diagnosis that focused on fiscal profligacy, the framing of solutions by the Task Force was limited to strengthened intergovernmental fiscal discipline. In a statement issued by the Task Force on 25 March 2010, the ordoliberal nature of the policy response was already well established: ‘For the future, the surveillance of economic and budgetary risks and the instruments for their prevention, including the Excessive Deficit Procedure, must be strengthened’ (European Council, 2010c). Furthermore, the Task Force was mandated by the European Council of 25–26 March ‘to present the measures needed to reach the objective of an improved crisis resolution framework and better budgetary discipline, exploring all options to reinforce the legal framework’ (European Council, 2010b). As part of its ongoing institutional dialogue with the Task Force, the ECB also offered its public support for a more rigorous ‘quasi-automatic’ implementation of the SGP rules (ECB, 2010).

Agenda-setting on the six-pack was hard-fought between the Task Force and the Commission, with the EU executive potentially seeing its right of initiative under threat (Bauer and Becker, 2014). The EU executive, therefore, acted to prepare a ‘six-pack’ of legislative proposals one month before the Task Force delivered its final report. In the end, the proposals confirmed the blurring of the Community method, with a high level of convergence in the framing of solutions between the two texts. Both prioritised strengthened intergovernmental fiscal discipline through more automatic sanctioning and a broadening of the scope for surveillance and coordination under the SGP (Commission, 2010). According to one official closely involved with the work of the Task Force, while the forum provided the ‘political leadership’ and helped ‘forge consensus amongst the representatives of member states’, the Commission was relied upon as a site of ‘considerable technical expertise’ (Council Directorate for Economic Policy Official, 2013, Interviewed by the author (Brussels, 27 September). Senior official in the unit for economic policy). Following the recommendations of the Task Force that all parties opt for a ‘fast track’ approach, an agreement was reached in the Council on 15 March 2011 to ensure the effective implementation of the new fiscal surveillance arrangements as quickly as possible (Commission, 2011a).

It has been noted that the intensification of the crisis within the Eurozone ‘took the European Parliament by surprise’ (Van Rompuy, 2014: 126). However, in approaching the six-pack legislation, it was understood by MEPs as the first opportunity since Lisbon to prove that the European Parliament can act as a ‘real power’ and ‘co-legislator’ alongside the Council (Vice President (EPP) in the ECON Committee, 2013, Interviewed by the author (Brussels, 25 September). Former vice president of the ECON Committee). As a means to broaden its influence across the six-pack legislative package, the European Parliament employed a strategy of issue linkage: ‘Even if one was not decided under co-decision, it was dealt with as though being under co-decision’ (Héritier et al., 2015: 66). The seventh European Parliament, elected in 2009, had a strong centre-right contingent: the European People’s Party (EPP) with 36% of seats, the Progressive Alliance of Socialists and Democrats (S&D) with 25%, the Alliance of Liberals and Democrats for Europe (ALDE) with 11%, and the Greens/European Free Alliance (Greens/EFA) with 8% (O’Keeffe et al., 2016: 221). During the negotiations on the six-pack, the main parliamentary groupings were ideologically divided along left–right positioning when considering the economic proposals with redistributive implications (O’Keeffe et al., 2016). This was reflected in the tight majority margins when the ECON committee – prior to negotiations with the Council – voted to approve amendments to the six-pack legislation on 20 April 2011 (European Parliament, 2011a). Despite the strategy of issue linkage, the S&D and the Greens/EFA voted against or abstained from the adoption of the SGP-related proposals, while four separate coalitions made up of EPP and ALDE members provided the majority margins needed to approve the legislation (O’Keeffe et al., 2016; see also Bressanelli and Chelotti, 2016: 518).

In framing the crisis, political groups differed between the defending of ordoliberal solutions based on intergovernmental fiscal discipline and Keynesian counter-frames supporting increased supranational fiscal solidarity. As the largest group in the European Parliament, the centre-right EPP framed the six-pack as essential for establishing a ‘sound and sustainable’ fiscal governance framework – presenting itself as the ‘driving force’ in preserving and reinforcing the legislative package in the face of attempts by the left to weaken fiscal discipline (EPP, 2012a; see also Wortmann-Kool, 2011; and Feio, 2011, reports). In alliance with the EPP, the liberal-centrist ALDE framed the six-pack and its measures to strengthen the SGP as a ‘victory for financial stability and growth’, although the group’s leaders warned that fiscal discipline is ‘not a panacea’ (ALDE, 2011; see also Goulard, 2011, report). In contrast, the centre-left S&D stood in firm opposition to several of the SGP-related proposals, with the group’s leaders warning that ‘austerity alone won’t resolve the eurozone crisis’ (S&D, 2011a). Instead, the group provided counter-frames supporting the implementation of supranational fiscal solidarity. This included a ‘strong system of eurobonds’, a ‘real European budget financed through own resources’ and a ‘growth and jobs pact’ (S&D, 2011b). These Keynesian policies were presented as an S&D ‘priority’, although progress towards a ‘European redemption fund’ and a more ‘flexible SGP’ were offered as a possible starting point to the deliberations (MEP (S&D) in the ECON Committee, 2014).

In addition to being ideologically divided on fiscal integration, MEPs were also faced with substantial pressure from the EU institutions to enact the six-pack legislation (Bressanelli and Chelotti, 2016; Héritier et al., 2015). First, the Task Force, under the leadership of President Van Rompuy, had encouraged a ‘fast-tracked’ approach (European Council, 2010a). Moreover, even before the trialogue negotiations got underway, the Commission issued repeated warnings to the European Parliament against progressing to a second reading (Commission, 2011a). The outcome was that the European Parliament’s final negotiating position – agreed ahead of the European Council of 23–24 June 2011 – followed closely the frames for fiscal governance deliberated on in the Task Force and formalised in the Commission’s legislative proposals (European Parliament, 2011b). The framing of ordoliberal solutions prioritising strengthened intergovernmental fiscal discipline remained, with the ECON Committee backing the majority of the proposals for reinforcing the preventative and corrective arms of the SGP framework (see Wortmann-Kool, 2011, and Feio, 2011, reports). The European Parliament did add provisions for the implementation of reversed qualified majority voting (RQMV) to make warnings and sanctions more automatic under the SGP framework, along with increased budgetary surveillance powers for the Commission (European Parliament, 2011b). These increased demands for fiscal surveillance were agreeable to MEPs because they reflected an attempt to reassert the primacy of the Community method and the political role of the supranational institutions in EMU (Senior MEP (EPP) in the ECON Committee, 2014). Keynesian counter-frames supporting the implementation of supranational fiscal solidarity were notably absent from the amended texts adopted by the European Parliament. However, the exception to this was a revision clause on European sovereign bonds (‘Eurosecurities’) that was inserted by MEP Sylvie Goulard, a rapporteur for the ALDE, which required the Commission to be forthcoming with a report and possibly legislative proposals by the end of 2011 (see Goulard report, 2011: 9).

In negotiations on the six-pack, it was only on political integration where a high degree of cross-party consensus could be reached on the need to frame solutions through the language of supranationalism (European Parliament, 2011c). Here, appealing to normative arguments of democratic legitimacy and accountability, MEPs sought to force the Council to insert amendments providing for an increase in the European Parliament’s own institutional role in EU fiscal governance (Rittberger, 2014). To accompany the measures providing for reinforced rules-based surveillance, the European Parliament successfully inserted amendments to introduce an ‘economic dialogue’, which would ‘offer the opportunity to the member state concerned … to participate in an exchange of views’ (European Parliament, 2011c). However, apart from selected transparency and accountability measures, under these amendments the European Parliament’s role would remain largely limited to consultation and supervisory privileges (Maurer, 2013). The framing of supranational political solutions was limited here by the prevailing legal basis and by the earlier draft agreements agreed between the co-legislators (Fasone, 2014).

Despite disagreements with the Council over the implementation of RMQV voting, the European Parliament deliberately did not progress beyond first reading in order to allow negotiations to be concluded quickly (European Parliament, 2011d). On 28 September 2011, parliamentary negotiators reached a deal with the Polish Presidency on the issue of ‘semi-automaticity’. At the concluding plenary vote on the six-pack legislation, ideological differences remained high as groups on the left voted against or abstained from the SGP-related proposals (Bressanelli and Chelotti, 2016: 519). The final package strengthening intergovernmental fiscal discipline entered into force on 13 December 2011. The strong centre-right contingent in the European Parliament can explain the considerable support for the framing of ordoliberal solutions during the negotiations on the six-pack. However, ideological cleavages alone cannot account for the absence of Keynesian counter-frames supporting supranational fiscal solidarity measures. Important here was the leadership role played by the European Council throughout the legislative process, with the final package mirroring the policy solutions deliberated on in the Task Force and formalised in the Commission’s proposals. With the ECON Committee ideologically divided on the SGP-related measures and under pressure from EU leaders to reach agreement at first reading, the European Parliament’s framing strategy converged around common institutional interests. Yet, even backed by a strong consensus among MEPs, political solutions were limited in the six-pack legislation to a series of transparency and accountability privileges.

Fiscal compact

Market sentiments towards the eurozone showed significant fluctuations over the remainder of 2011 and the first half of 2012 (De Grauwe, 2013). As such, prior to the six-pack legislation entering into force, further reform negotiations were already being led by the European Council in an effort to restore market confidence in the eurozone. Again, it was Germany with its ordoliberal preferences that had a prominent role in framing policy solutions around intergovernmental fiscal discipline within this forum. The German Chancellor, Angela Merkel, was responding directly to domestic concerns about the potential for ‘moral hazard’ arising from the ad hoc financial assistance facilities and the ECB’s unconventional monetary policy actions (Member of the Cabinet for the European Council President, 2014). At the insistence of Chancellor Merkel, the European Council agreed on 9 December 2011 that EU member states should negotiate ‘a new fiscal compact’ as an intergovernmental treaty outside of the EU legal framework (European Council, 2011).

The aim was to establish what was termed as a ‘fiscal stability union’, with a core feature being a demand for the incorporation into the national legal order of an SGP-related ‘golden rule’ on structural deficits (European Council, 2011). In exchange for limited German concessions on emergency bailout facilities, a successful alliance was made with French President Nicolas Sarkozy in support of the fiscal compact (Member of the Cabinet for the European Council President, 2014, Interviewed by the author (Brussels, 2 April). Senior advisor to the President on economic and euro area issues; see also Crespy and Schmidt, 2014). Buttressed by the dual alliance of Germany and France, a consensus was reached quickly in the European Council on the policy solutions outlined in the fiscal compact, going beyond what was achieved in the six-pack. Despite the Commission being empowered with a strengthened budgetary supervisory role in the fiscal compact (Bauer and Becker, 2014), the EU executive was largely excluded from the substance of the intergovernmental negotiations led by Germany and France (Senior Director in DG ECFIN, 2013. Interviewed by the author (Brussels, 26 September). Senior official in charge of coordination work in DG ECFIN).

While the European Parliament was granted increased co-legislative powers under the Lisbon Treaty, the intergovernmental character of the fiscal compact meant it was sidelined during the negotiation process (MEP (S&D) in the ECON Committee, 2014, Interviewed by the author (Brussels, 31 March). Senior member of the ECON Committee). Moreover, discussions were proceeding in the European Council as a ‘matter of urgency’, with a fixed deadline being set for completion (European Council, 2011). In considering the fiscal compact, MEPs were also again ideologically divided along a left–right cleavage between the defending of ordoliberal solutions and the promotion of Keynesian counter-frames. The centre-right EPP offered their full support to the policy solutions in the fiscal compact as ‘crucial for rebuilding the stability and the international reputation of the eurozone’ (EPP, 2012a). In alliance with the EPP, the liberal-centrist ALDE group also broadly supported a permanent ‘golden rule’ limiting debt as an ‘important and necessary step’ (ALDE, 2012; Senior MEP (ALDE) in the ECON Committee, 2013, Interviewed by the author (Brussels, 24 September). Senior member of the ECON Committee and chief negotiator). In contrast, the centre-left S&D stood in firm opposition to the fiscal compact for ‘concentrating on fiscal stability without anything on growth and solidarity’ (MEP (S&D) in the ECON Committee, 2014, Interviewed by the author (Brussels, 31 March). Senior member of the ECON Committee; see also EUobserver, 2012). As an alternative, senior members of the S&D group wanted to see a path set out in the agreement towards the issuance of stability bonds (MEP (S&D) in the ECON Committee, 2014, Interviewed by the author (Brussels, 31 March). Senior member of the ECON Committee).

With the European Parliament politically excluded, the opportunity to provide counter-frames and parliamentary scrutiny to oppose the policy ideas in the fiscal compact was limited. However, the European Parliament was able to participate in an ad hoc working group throughout January 2011 with the aim of negotiating the final text of the new treaty. The European Parliament formed an alliance with the Commission with one key political objective: ‘to bring the content of the treaty back into EU law’ (Fasone, 2014: 173; see also European Parliament, 2012b). As in negotiations on the six-pack, the framing of supranational political solutions was articulated through normative democratic arguments alongside novel legal arguments concerning the jurisdiction of the EU institutions and the status of the fiscal compact as an ‘international agreement’ (Miller, 2012: 47–57). MEPs participating in the working group argued that the fiscal compact was incompatible with the EU Treaties because it failed to respect the Community method of decision-making to ensure ‘proper democratic scrutiny and accountability’ (European Parliament, 2012a, 2012b). MEPs also raised the legal argument that ‘most, if not everything, could have been done through secondary legislation’ while questioning the ‘overlapping rules and competences’ with the approved six-pack legislation (European Parliament, 2012a).

The fiscal compact was agreed at an informal summit of European leaders on 30 January 2012. While MEPs were again ideologically divided along a left–right cleavage, it was the intergovernmental character of the fiscal pact that was the decisive factor conditioning the European Parliament’s framing activity. With little opportunity to act as a source of counter-frames, the final agreement implemented the ordoliberal policy ideas strengthening intergovernmental fiscal discipline first negotiated by European leaders in early December (European Council, 2012). Excluded from the substance of the negotiations, the European Parliament’s framing strategy focused on the major common institutional interest of preventing intergovernmental agreements from becoming the decision-making norm in EMU. In alliance with the Commission, a commitment was obtained in the final agreement to take ‘the necessary steps’ to incorporate the substance of the Treaty into the EU framework (Article 16). However, beyond an amendment that the President of the European Parliament ‘may be invited’ to Euro Summit meetings (Article 8), the final agreement did not substantially increase the political role of the European Parliament in EU fiscal governance (Fasone, 2014: 170–180).

Two-pack

The Commission President, José Manuel Barroso, expressed strong institutional support for the policy solutions agreed in the fiscal compact, describing the agreement as a ‘comprehensive response to the current crisis’ and a ‘strong signal to markets that Europeans are serious about their new stability culture’ (Commission, 2011b). However, agreement on the substance of the policy ideas formulated in the European Council did not extend to the legal form, with Commission officials expressing strong reservations about the circumvention of the Community method (Bressanelli and Chelotti, 2016: 520).⁵ As a response, on 23 November 2011, proposals for a further two-pack were presented by the Commission within the framework of EU law. The lead role of the Commission over the two-pack legislation was facilitated by a policy context made up of escalating and then, after July 2012 and the ECB’s commitment to assume a lender of last resort function, de-escalating market pressure (Laffan and Schlosser, 2015: 5).

Converging with the prior six-pack and the parallel policy discussions evolving on the fiscal compact, the framing of policy solutions remained limited to strengthened intergovernmental fiscal discipline. Guided by ordoliberal ideas, the two proposals embedded a regime of ‘enhanced surveillance’ of draft budgetary plans designed to build on and compliment the six-pack reforms for budgetary coordination (Commission, 2011c). Also, overlapping with the fiscal compact, numerical fiscal rules were required to be implemented into national law on structural deficits in line with the budgetary objectives of the SGP (Commission, 2011c). The Vice President of the Commission, Olli Rehn, argued that further reforms were necessary to ‘install a stability culture as the core principle of economic governance in the EU’, adding in reference to the proposals on national fiscal rules that ‘you are right if this reminds you of the Schuldenbremse’⁶ (Commission, 2011d). At a meeting of the European Council on 9 December 2011, it committed to ‘examine swiftly the new rules proposed by the Commission’ (European Council, 2011). Respecting the timetable set by the European Council and Council Presidency, a quick agreement was reached in the Council by 21 February 2012, with little opposition to the ordoliberal policy ideas in the two-pack.

With the fiscal compact and emergency bailout mechanisms being established outside the framework of EU law, there was a perceived risk among MEPs that the European Parliament could be further marginalised in the governance of EMU (European Parliament, 2012a). The political form of the two-pack as a Community method legislative procedure was therefore supported by the European Parliament (Senior MEP (ALDE) in the ECON Committee, 2013, Interviewed by the author (Brussels, 24 September). Senior member of the ECON Committee and chief negotiator; see also Héritier et al., 2015: 69). However, when the economic proposals were presented to the ECON committee at the end February 2012, ideological divisions had intensified with a rift forming between centre-right proponents of the ordoliberal two-pack and a strengthened centre-left coalition advocating Keynesian counter-frames (European Parliament, 2012c). Again, the centre-right EPP framed solutions as demanding strengthened intergovernmental fiscal discipline. The group was explicit in its desire to ‘add as many elements of the fiscal compact as possible to both texts enshrining them in EU law and making them enforceable by EU institutions’, accusing the left-leaning parties of ‘dragging their feet’ (EPP, 2012b). In contrast, leaders from the liberal-centrist ALDE group expressed heightened concern that ‘the things that are now being put in place concern primarily fiscal discipline … but what they aren’t doing is putting in place fiscal solidarity’ (Euractiv, 2012). The ALDE group provided counter-frames supporting supranational fiscal solidarity, including most importantly a ‘mutualisation of sovereign debt’ – adding that ‘there are different ways of doing it but that in the end it has to be done’ (Euractiv, 2012). The centre-left S&D group was the most critical of the two-pack, claiming that ‘austerity has failed’ (S&D, 2012). The group’s leaders committed ‘to oppose any incorporation into Union law of the fiscal compact as it stands’ (S&D, 2012). In order to ensure a strong recovery from the crisis, the S&D also framed supranational fiscal solidarity as a priority, including a far-reaching mutualisation of debt (termed ‘the battle for Eurobonds’) (S&D, 2012).

During the scrutiny and amendment of the two-pack in the ECON Committee, left-wing groups were emboldened by the changing domestic political circumstances following the election of French President Hollande, the legislative elections in Greece, and by the new technocratic Italian Government led by Prime Minister Monti.⁷ However, the core proposals by the Commission for transferring the provisions of the fiscal compact back into EU law were still preserved, with the ECON Committee (led by the EPP Group) largely translating the policy frames strengthening intergovernmental fiscal discipline (see Ferreira, 2012, report). Moreover, amendments were agreed to increase further the Commission’s own powers of budgetary enforcement through the increased use of RQMV in the Council (see Gauzès, 2012, report). However, in contrast to the negotiations on the six-pack, counter-frames supporting supranational fiscal solidarity were also tabled at the insistence of a strengthened centre-left coalition. Three main policy amendments were inserted: (1) a European Debt Redemption Fund, (2) a Commission roadmap for introducing Eurobonds, and (3) a growth mechanism equal to 1% of GDP for infrastructure investment (European Parliament, 2012c). The contentious nature of the agreement was reflected in the tight majority margins in the ECON Committee vote taken at the end of May 2012, with the S&D abstaining and the trialogue negotiations with the Council postponed.

Overlapping with the six-pack negotiations, on political integration there was a high degree of cross-party consensus on the framing of supranational solutions. Appealing to normative arguments, the ECON Committee stated a position that the budgetary surveillance powers conferred on the Commission by the two-pack ‘must be democratically controlled through the involvement of the European Parliament’ (European Parliament, 2012c; see also Rittberger, 2014). In amendments tabled on the two-pack, earlier provisions on economic dialogue facilitating an ‘exchange of views’ between the European Parliament and representatives of member states were extended to cover the enhanced surveillance procedures and the assessing of draft budgetary plans (European Parliament, 2012d). Moreover, in order to provide ‘oversight, accountability and legitimacy’, further amendments were tabled to try to limit the Commission’s extra surveillance powers through ‘delegated acts’ (European Parliament, 2012c). However, while the amendments increased the European Parliament’s ‘right’ to be informed and consulted, its actual decision-making role in EU fiscal governance remained marginal under the new procedures (Fasone, 2014).

Despite substantial institutional pressure being placed on the European Parliament from the outset, the trialogue negotiations with the Council still took a total of 15 months to finalise (Bressanelli and Chelotti, 2016: 520–521). With a shift in domestic political circumstances, a strengthened centre-left coalition in the European Parliament was prepared to use a delay strategy in order to force more ambitious proposals for debt mutualisation (European Parliament, 2012d). In the Council, opposition to a debt redemption fund was led by Germany, with Chancellor Merkel rejecting a pact as ‘impossible’ (Advisor to the Cabinet of the European Council President, 2014, Interviewed by the author (Brussels, 4 April). Senior advisor to the President). The EPP Group positioned itself with the Council throughout the procedure in supporting the transfer of the fiscal compact element into EU law (EPP, 2012b). The Vice President of the Commission, Olli Rehn, also urged MEPs that ‘our joint interest is not to get institutionally overtaken by yet another intergovernmental agreement’ (Rehn, 2012). A compromise was reached on 20 February 2013 when the Commission committed to forming a group of ‘wise men’ to draw up recommendations for establishing a debt redemption fund (European Parliament, 2012d).

The two-pack legislation entered into force on 30 May 2013. A dissenting centre-left coalition in the European Parliament can account for the brief resurgence of Keynesian counter-frames supporting supranational fiscal solidarity. However, agreement in the ECON committee was fragile during the negotiations, with the EPP group supporting the status quo. Compounding the ideological division was opposition from the Council and Commission to the new policy ideas proposed by centre-left MEPs, as well as pressure from European leaders to compromise in order to bring to an end the extended trialogues. Combined, these factors eroded the negotiating position of the European Parliament, with the final package preserving the core ordoliberal frames strengthening intergovernmental fiscal discipline driven by the Commission. Again, while there was a consensus among MEPs on the pursuit of common institutional interests, political frames supporting an increased supranational role for the European Parliament were also limited in the final package to a series of transparency and accountability rights.

Conclusion

Through a frame analysis of the eurozone crisis reform negotiations on the six-pack, two-pack, and intergovernmental fiscal compact treaty, the European Parliament has been found to have converged around framing devices supporting intergovernmental fiscal discipline. These findings are of significance to the literature on supranational entrepreneurship, with a combination of structural and agency factors limiting the European Parliament’s capacity to promote supranational fiscal solidarity. In terms of agency, ideological divisions in the European Parliament can explain the considerable level of support by MEPs for the framing of limited ordoliberal solutions, as well as the fragile nature of agreements in the ECON Committee. However, ideological divisions alone do not account for the absence of further-reaching Keynesian counter-frames. Important here is structure and the leadership role played by the European Council during both the intergovernmental negotiations on the fiscal compact treaty and in the adoption of the six-pack and two-pack by co-decision. Ideologically divided and under institutional pressure, the European Parliament’s framing strategy focused on common institutional interests and the pursuit of supranational political solutions, although these were limited by the existing legal basis and by the earlier draft agreements agreed between the co-legislators.

These findings are broadly consistent with the new intergovernmentalist claims that the supranational institutions are no longer ‘hard-wired’ to the pursuit of supranational integration. Rather, the European Parliament acted ‘strategically’ as opposed to idealistically in accordance with a hostile policy environment. Framing the crisis around intergovernmental fiscal discipline was not only driven by internal ideological cleavages, but it was also practical due to the external institutional pressure being applied by the European Council and Commission. Moreover, by focusing on preserving the Community method and strengthening its own democratic role in EU fiscal governance, the European Parliament acted in a manner consistent with preserving its own legislative influence and power.

Finally, this article contributes to the literature on framing by highlighting the important role of macroeconomic ideology in informing the diagnosis of crises, guiding different policy solutions, and providing an integration path for EU leaders to follow. Important here is the pairing of ordoliberalism with intergovernmentalism and of Keynesianism with supranationalism. In their original form, these economic philosophies were not designed to explain differentiated integration within EMU, and the legacy of Maastricht has also partly conditioned the evolution of policy within the single currency area. Yet, during the eurozone crisis, while ordoliberalism was used to frame existing policy solutions building on the decentralised SGP framework, a Keynesian philosophy was able to frame new policy solutions implementing centralised fiscal transfer mechanisms. One key inference from this pairing is of the ideational forces working to reproduce asymmetry within EMU, with ordoliberal dominance associated with intergovernmental integration and a ‘rules-based’ approach to fiscal discipline.

Footnotes

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

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