Smoke with fire: Financial crises and the demand for parliamentary oversight in the European Union

Abstract

The handling of the 2008 financial crisis has reinforced the conviction that the European Union (EU) is undemocratic and that member states are forced to delegate overwhelming power to a supranational technocracy. However, European countries have engaged with this alleged power drift differently, with only a few member states demanding more parliamentary scrutiny of EU institutions. This article develops a political economy explanation for why only some states have enforced mechanisms to monitor the EU more closely. Our theory focuses on the role of the crisis and the impact of fiscal autonomy in countries outside and inside currency arrangements such as the European Economic and Monetary Union (EMU). We argue that, in the aftermath of a severe economic shock, member states outside the EMU possess more monetary and fiscal resources to handle the crisis. These would then demand oversight of EU decision-making if their fiscal sustainability depends on the Union. By contrast, Eurozone states that need policy changes cannot address the crisis independently or initiate reforms to scrutinize the EU. Hence, we argue that during the heated moments of severe economic downturns, parliaments in Eurozone countries discuss supranational supervision rarely. As these legislatures have nevertheless to give in to the popular demand for EU control, they express support for more EU supervision in the infrequent times of debate. We provide evidence for our theory with a cross-national analysis of EU oversight institutions, and a new original dataset of parliamentary debates during the Eurozone crisis. Our findings highlight the political consequences that financial nosedives have across the diverse membership of a supranational organization.

Oppositional voting in the Council of the EU between 2010 and 2019: Evidence for differentiated politicisation

“…Moreover, it is reasonable to expect a greater impact in this direction in the wake of the crises. Eurosceptic parties have not only made significant electoral progress in most member states during the last decade (de Vries and Hobolt, 2020) but many national parliaments have also increased their efforts to oversee governments at the EU level (Genovese and Schneider, 2020; Rauh and de Wilde, 2018; Winzen, 2012). If Eurosceptic opposition parties increasingly oversee the affairs of national governments in Brussels, then it follows that governments face greater incentives of strategically responding to them and even accommodating their position (Hagemann et al., 2019).…”

“…First, financial and economic policies have traditionally been among the most controversial policy areas in the EU (Wallace and Reh, 2020: 80). Given that the Euro and financial crises generally increased economic stress in the member states (Genovese and Schneider, 2020; Scharpf, 2015; Wasserfallen et al., 2019), controversies over financial and economic policy, and especially over the EU's role in these policies, became more salient and polarised, thus politicised, in the member states (Schimmelfennig, 2014).…”

“…Nonetheless, we can expect significant changes. First, member states have been asymmetrically exposed to economic stress, which has increased economic tensions and disparities (Genovese and Schneider, 2020; Scharpf, 2015; Wasserfallen et al., 2019). Second, the crises have enhanced two contrasting political developments that manifest themselves in the Council.…”

The European Semester and Parliamentary Oversight Institutions Inside and Outside of the Euro Area

“…By implication, the incentives for parliamentary actors to reform oversight institutions might vary across member states. Genovese and Schneider (2020) argue along these lines that Euro area parliaments faced greater pressure to enhance scrutiny in response to the 2007-2008 financial crisis.…”

“…Euro area integration is highly differentiated, and the Semester's implications vary accordingly across countries. Yet, the literature on differentiated integration has largely sidestepped any discussion of national parliaments, and research on national parliaments has hardly mentioned differentiated integration (for reviews, see Holzinger & Schimmelfennig, 2012;Winzen, 2021; but see Genovese & Schneider, 2020). Specific research on the European Semester, moreover, disagrees on the effect of Euro area membership on national parliaments (Hallerberg et al, 2018;Rasmussen, 2018).…”