Dr. Steffen Murau| steffenmurau.com

‘The Transformation of Eurozone Fiscal Governance. Mitigating Fiscal Discipline through a Proliferation of Off-Balance-Sheet Fiscal Agencies’ (with Andrei Guter-Sandu)

The Eurocrisis dispelled the “neoliberal” Eurozone governance approach that the “efficient” crowd intelligence of private financial institutions would “discipline” the balance sheets of national sovereigns. Instead, during the Eurocrisis, the private balance sheets of Eurozone financial institutions contracted sharply and had to be bailed out by European treasuries. Rather than disciplining public balance sheets, private balance sheets forced the treasuries of the most crisis-ridden countries to massively expand and take on new debts for the bailouts. Even though these events should have sensitised European policymakers to the evolving complex role of public balance sheets for Eurozone governance, the official reforms—first and foremost the Fiscal Compact—reinforced the orientation towards market discipline.

While these developments have been well-noted, what has been less explored is the proliferation of alternative channels for governance in the Eurozone. Indeed, we argue that the Eurocrisis has triggered a process of strengthening a distinct governance logic that emphasizes “off-balance-sheet fiscal agencies”. Our paper traces the evolution of this mechanism of “governing through off-balance-sheet fiscal agencies” by looking at four off-balance-sheet agencies that acquired fiscal responsibilities: first, the European Investment Bank which predates the Eurozone; second, the European Stability Mechanism, which emerged during the Eurocrisis and may be transformed into a European Monetary Fund; third, the Single Resolution Fund, which comes close to a European deposit insurance scheme for systemically relevant banks; and fourth, the European Commission’s plans for a special purpose vehicle to securitize national sovereign bonds and issue “European Safe Bonds”.

Presentations at EuroMemo online conference (09/2020)

Andrei Guter-Sandu, London School of Economics

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