The original Maastricht regime designed the Eurozone’s fiscal segment in a way that sought to keep member states’ treasury budgets balanced by disciplining them through market forces, reducing the overall volume of public indebtedness, prohibiting monetary financing, and avoiding that Eurozone treasuries bail out each other. In this article, we analyse how this ‘neoliberal model of Eurozone fiscal governance’ has been gradually superseded by an alternative approach that we call ‘governing through off-balance-sheet fiscal agencies’ (OBFAs). OBFAs are special purpose vehicles that complement treasuries in supporting public investment, offering solvency insurance for banks, providing capital insurance of last resort for other treasuries, and expanding the stock of safe assets. By sponsoring OBFAs, treasuries can substitute ‘actual’ liabilities on their balance sheets, which are potentially in conflict with neoliberal EU rules, with ‘contingent’ liabilities—guarantees that do not appear on-balance-sheet. Together, national and supra-national treasuries and OBFAs form a ‘fiscal ecosystem’ in which those neoliberal rules get perpetuated and re-emphasized on a declaratory level but in practice are increasingly mitigated. This new model of Eurozone fiscal governance is reflected not only in multiple policies implemented since 2010 but also represents the main strategy in many current Eurozone reform proposals.
Presentations at EuroMemo online conference (09/2020) and the research seminar of the Department of International Politics at City, University of London (10/2020)
Andrei Guter-Sandu, London School of Economics