The handling of the recent sovereign debt crisis in Europe has raised fears that decision making among European countries has become less democratic, and that technocrats now call the shots in the European Union (EU). In this article we confront this view by proposing an alternative theory for the effects of financial crises in this supranational organization. We argue that national parliaments in Europe refrain from demanding control of EU institutions during a financial crisis if they think their request may undermine the credibility of governments in other member states their policies depend on. A crisis should then depress demand for political reforms in monetarily independent countries that are in financial trouble, but not in countries whose fiscal and monetary status rely on the economic reputation of the Union as a whole. We show evidence in support of our theory with qualitative evaluations and econometric regressions, using different types of data for the years between 1950 and 2010. Our findings let us reconsider that the recent Eurocrisis has depleted the power of the European legislatures. * Stanford University; genovese.federica@gmail.com † University of Konstanz; gerald.schneider@uni-konstanz.de. Previous versions of this paper have been presented at the meeting of the 2012 German Political Science Association (DVWP) at the University of Tübingen and at research seminars at the Free University Berlin, Leiden University, WZB, Tel Aviv University and the Institute for Advance Studies Toulouse. We thank the participants and Zareh Asatryan, Simon Hix, Martin Höppner, Kai Konrad, Rhea Molato, John Roemer, Thomas Sattler, Tal Sadeh, Enrico Spolaore, Aneta Spendzharova, Bernard Steunenberg, Jean Tirole and Vera Tröger for constructive comments. We are also grateful to Alexander Bräunig for research assistance and Cristina Bodea, Tal Sadeh and Thomas Winzen for sharing data. Replication data and files will be found at the homepage of the first author. The political economy literature disagrees over the conditions under which a country introduces political reforms following a severe economic shock. A main proposition within this body of research boils down to the expectation that governments do not launch policy reforms without the pressure from crises. Rodrik (1996: 27) Addressing the question whether 'smoke follows fires' in light of these concerns, this paper examines the institutional consequences of financial collapses in Europe. We present an argument that links together lessons from the literature on the effects of crises on policy, coalition building and unanimity voting, seeking to explain the trajectory of supranational decision making in the continent from the post-war years until today. On the one hand, remarkable integration and progressive legalization have occurred in the aftermath of crises in modern Europe. This observation leads us to believe the EU is a supra-nationalist democracy with the capacity to introduce institutional changes that are more universally beneficial than the status...