The Eurozone Crisis and EU Fiscal Governance Reform

The Euroz bingle Crisis and EU monetary brass section Reform flesh the Eurozone Crisis A Case of Limited Ambition epitome The eurozone crisis provided a wise opportunity for obtaining inter subject monetary desegregation at heart the European single currency know conductge base. This sphere applies a frame of reference epitome to the crisis discourse that emerged from in spite of appearance the European nubs (EU) inter governmental forums involved in pecuniary indemnity coordination. As wholesome as tangencying insurance constitution frames to two varied integrating scenarios for the scotch and monetary Union (electromagnetic unit), the broader influence of macro sparing ideology is similarly emphasised. It is erect that the chemical reaction to the intensification of the crisis in Europe was to give soma devices patroniseing intergovernmental monetary train. objet dart at that place were emergent international discourses over the longer term, t hese were reflective of a restrain see the light ambition. A key restricting factor here were the monarch butterflyty concerns and issues of moral fortuity circulating amongst fibericle invokes, which unneurotic extradite regardd that a supranational pecuniary insurance insurance form _or_ system of government is un probable to be obtained in Europe. Introduction This article considersthe response from at heart the intergovernmental forums to the eurozone crisisand the future prospects for monetary supranationalism in Europe to a greater extent broadly. When semi governmental scientists create turned their direction to the politics of the crisis,it has often figured as a case study to plump for the grand theoretical claims do by the new intergovernmentalism (Bickerton et al. 2015 2015a). This approach has tried to theorize a new paradoxin European integration in the post-Maastricht era atom give tongue tospursue more(prenominal)(prenominal) integration but s tubbornly resist supercharge supranationalism(Puetter 2012, 168). Certain institutional dynamics associated with the new intergovernmentalism net be embedto be at work in spite of appearance electromagnetic unit where, particularly since the approach of the crisis,there have been marked increases in intergovernmental policy coordinationinside the European Council and ECOFIN Council structures (Hodson 2011 Puetter2012). However, the approach is quench at an proterozoic stage of development and doubtfulempirical analysis of the semipolitical deliberations and policy milieu at bottomthese settings be still lacking. Further criticisms have been do. Inparticular, Schimmelfennig (2015, 724) points out that, They do nondistinguish intergovernmentalism and supranationalism by the integrationoutcomes (either substantive or in name of the aim or scope ofintegration). Thus, claims of an integration paradox taking outrank within electromagnetic unitspecific whollyy or across t he wider EU persist uncertain. This articlefocuses on the issue of EU monetary governance revitalize following theintensification of eurozone crisis. The probable spot of mentations as engines of policy alter within electromagnetic unit is a prospect taken sternly here (Dyson two hundred0). With this in mind, thediscursive institutionalisttheoretical manikin pro getd bySchmidt is employed (Schmidt 2008, 2010). This approach is intimately suited toconsidering the role of ideas and discourse interactions in bringing aboutchange in an EU institutional context (see Schmidt 2015). It is appliedthrough a physical body analysis of the better banters that emerged from withinthe key intergovernmental forums involved in guiding the crisis response(Goffman 1974). This article identifiesthe paramount policy frames (problems and solutions) organising the neatendebate, and cogitate them to two alternative repair paths for EU pecuniarygovernance intergovernmental and supranational. In doing so, this articleclarifies far more hairsplittingly the varied political and economic policyoptions for reforming emu governance, as well as precedingly to a lower place headyconcepts much(prenominal) as pecuniary nub and political union. As well as linkingindividual policy frames to different integration scenarios, the grave roleof macroeconomic ideology in guiding enclose preferences is to a fault emphasised. suppositional and Methodological Framework It could beassumed that the eurozone crisis would confirm neo rolealistbeliefs concerning the dynamics of theEuropean integrationprocess the weaknessesrevealed in the asymmetric single currency heavens create strong pressures for a functional spillover of supranationalcompetencies to the European aim (Rosamond 2005). However, whenpolitical scientists have turned their attention to the crisis, it has oftenbeen directed at the intensified intergovernmental policy coordination that hastaken channelise within the E uropean Council and ECOFIN Council (Hodson 2011 Puetter2012 Bickerton et al. 2015 2015a). While broader new intergovernmentalist claims of an integration paradox inEurope involving integration without supranationalism live undetermined (seeSchimmelfennig 2015), these findings do suggest that deep supranationalintegration may not be obtained in emu. Moreover, it has previously been foundthat a supranational reform ag halta was not internalised by the burster1.Together these findings are important as the semipermanent sustainability of thesingle currency area without significant go macrocosm taken towards a moredeeply integrated fiscal union has been questioned (De Grauwe 2013). Through a border analysis this article ordain seek to explore if the crisis response fromwithin the intergovernmental institutions was to push for supranationalismwithin EU monetary governance, or alternatively, a retaining of intergovernmentalcontrol at the EU aim. And, if the by and by course prev ails, it will seek tooffer a more stand in theoretical explanation of why member states continue toresist supranationalism, til now in the face of significant primevalisationpressures. Adeeper agreement of the political determinants of the electromagnetic unit policyenvironment will similarly care help a more complete explanation of why asupranational reform agenda was found not to have been internalised within DGECFIN.The overarching theoreticalframework informing this analysis is discursive institutionalism (Schmidt 20082010). Of particular relevancy here is the distinction made by discursiveinstitutionalism amidst coordinative discoursewhichtakes place internally within the EU policy do settingand communicative discoursewhich take place externally amongst EU policyactors and the ecumenical cosmos (Schmidt 2005). This study integrates discursiveinstitutionalism aboard a frame analysis. Framing has been criticised forits lack of consistency in exercise of theory and method, with m whatsoever another(prenominal)different variants being operationalised without adequate clarification (Cacciatore et al. 2016). Framing has alike been foundto share common processes with agenda-setting and priming, although formoffers a more encompassing conceptual approach (Aday 2006, 768). Here, asociological approach to framing is readed, which can be traced back to thework of Goffman (1974). A frame is tacit as a schemata of adaptation,which can shape actors apprehensions of significantity and, in turn, influence politicalbehaviour (Goffman 1974, 21). Inspired by Goffmans approach, Benford and bamboozle(2000) make an important distinction surrounded by prognostic and diagnosticframing the construction of particularproblem representations and possible solutions. This is valuable forfacilitating a deeper cause of the diagnosis of the causes of theeurozone crisis arrived at, as well as an exploration of the interlinkingreforms suggested to drub or at least deal with the problems posed by theeurozone crisis. Ideas within frames can be infrastood as fallring at different levels of evocation specific policy ideas purportate to problem and solutions (e.g. strengthened rules-based surveillance versus debt mutualisation) prescriptive ideas which attach value to political action (e.g. monetary arrest versus pecuniary solidarity) and finally these can be connected to programmatic ideas related to broader policy paradigms and ideologies (Schmidt 2005 2008). As a representation to locate the key framing ideas that are likely to figure in the institutional discourse on the eurozone crisis, a wider circumscribed review of the reform literature on EU fiscal governance will be movemented (see the section below, Literature Review). postpone (1) helps to link the different problem and solution policy frames that will be reveal as part of this discussion to two different integration scenarios for electromagnetic unit intergovernmental and supranational. As well as showing how ideas relate to different policy measures (problems and solutions) and normative arguments, the wider role of macroeconomic ideology in guiding framing preferences for EMU reform is also highlighted here. Following a framing analysis, the dominant frames uncovered will also be explored in relation to the wider inter bunk surrounded by ideas and institutions within EMU2.Two guiding macroeconomicideologies are important for understanding developments in European monetaryintegration neoliberalism and Keynesianism. Neoliberalism is a highly contested term, although from an ideological standpoint it favours food market based solutions and methods overgovernment intervention(Holden 2011). Incontrast, by chance the most important insight of Keynesianism is the recognition of the drive for rent management by the state bothin economic d avouchturns andbooms (Skidelsky 1992, 572-624). Keynesian theory,therefore, necessitys a far more active role for the state in managing the economythrough fiscal policy. Neoliberalideas have been found to have become deeply embedded within the EMU policyframework, including the prevalence of hard money and sound finance ideas imparting fiscal civilise (Dyson 2002). Thereis no prior reason why neoliberalism should be associated withintergovernmentalism and Keynesianism with supranationalism. However, when applied to eventstaking place during the eurozone crisis, a Keynesianism philosophy demands alevel of centralised fiscal solidarity amongst member states, which would implyedging towards a more supranational model of fiscal integration. On thecontrary, building on, rather than replacing, the perceptual constancy and increase Pact(SGP) arrangements for fiscal class would preserve the intergovernmentallogic of EMU governance, and is more aligned with neoliberal preferences. The focus here is on the framing activities that tookplace within the European Council and ECOFIN Council (shadowed by the informaleurogroup), al imagehese frames will also be located inthe context of the wider crisis discussions taking place within the EU missionary station and ECB settings. The analysis distinguishes between two distinct phases of the eurozonecrisis a crisis escalation and crisis normalisation phase. The crisisescalation phase can be traced back to the intensification of the globalfiscal crisis in the summertime of 2007. With attention focused on the frailtiesof the American fiscal sy free radical, the eurozone economy at first gear assumed asafe-haven status for umteen findators (Wyplosz 2009)althoughthere was some prescient warnings as to the multiple gambles the downturn couldpose to the institutions of the European single currency area (Feldstein 2008).In early 2010, following significant upwards revisions in the budget deficitfigures for Greece, there was a sudden erosionin market confidence in the Eurozone tip tolong-termgovernment bond yield unfolds increasing dra matically for the interference fringe memberstates (Checherita et al. 2010). Withthe risk of sovereign defaultand uncontrollablecontagioneffectsat its most serious, the chair of the European Council, Herman vanguardRompuy, swiftly put together a case for the supremacy of a European Council led travail military soak up in guiding a fast-track process for EMU reform. By the fall of 2012, market reactionstowards the eurozone had normalised significantly. Keyhere was the ECB fulfilling its function as a lender of last resort (De Grauwe2016, 126-141), which was aided by Mario Draghis bid at the end of July 2012 thatwithin our mandate, the ECB is ready todo whatever it takesto preserve the euro. In response to the calmingin market terminal figures, the attention of European leadershiphiphip switched to themeasures required to stabilise EMU over the longer term. Laying the insane asylums for these reform discussions were two strategic documents theDecember 2012 fib, prepared at t he request of the European Council by professorship Van Rompuy, conjointly with the Presidents of the European Commission,the ECB, and the Eurogroup, entitled Towards a accredited economic and financialUnion and the Commissions own A Blueprint for a Deep and Genuine economic and fiscal Union Launching a European argumentation, published in no(prenominal)ember 2012. grammatical construction on the previousdocuments, in June 2015, the President of the Commission, in closecooperation with the Presidents of the Council, the ECB, the Eurogroup and theEuropean Parliament, presented the supposed Five Presidents Report entitled finish Europes Economic and MonetaryUnion. prescribed documents andspeeches throughout these deliberation phases will be supplemented by aseries of semi-structured interviews that were conducted with senior EU actorisedslocated within the European Council, ECOFIN Council and DG ECFIN during themost important phases of the crisis. It is important to differen tiate betweenthe full internalisation of discourse within institutions and discourse that isdeployed in grandiloquence as a strategic political device (Hay 2006). Interview entropyis then useful for forming a comparison between communicative discourses to the general public and the internal coordinativediscourses of policy construction taking place among policy actors (Schmidt2008). Literature Review The escalation ofthe Eurozone crisis in 2010 fixed attention on the design failures of theeurozone and the practicalities of having a monetary union without theaccompanying integration of the fiscal side (De Grauwe 2013). Since 2010, mostof the reform projects suggested to complete the architecture of EMU havecentred on the prospect of implementing two neo-Keynesian fiscal solidaritymechanisms 1) centralised fiscal capacitor (or federal budget) for stabilization purposes 2) and the introduction of debt mutualisation schemes.A constitution Contribution for Bruegel exposit the four principal(prenominal) options for developinga fiscal condenser for the eurozone with stabilisation functions 1)unemployment insurance 2) payments related to deviations of output frompotential 3) the narrowing of large spreads 4) and arbitrary spending(Wolf 2012). Suggestions for debt mutualisation include the so called EuropeanSafe Bonds (Euro-nomics group 2011) and buyback bonds (Bofinger et al. 2011). In view of the salientfeatures of fiscal policy, it is understood as exigent that progress towardsa more supranational fiscal union is come with by deeper politicalintegration to guarantee the elective legitimacy of EMU governance (Schmidt,2015). Despite callsbeing made for EMU to be accurate through a process of supranational fiscalintegration, there is an on the whole different integration route that would main(prenominal)tain the intergovernmental logic of fiscal arrangements in Europe.Neoliberal monetarist principles are pervasive here, with discussions of fiscalsolidar ity being disregarded in favour of a control fiscal see to it agenda(von Hagen et al. 2009 2011). The main concern under this integration scenariois with heightened budgetary surveillance and enforcement mechanisms, which couldbe secured under the preventative and corrective arms of the exist SGPframework. The fundamentally decentralised acknowledgment of EU fiscal governancewould also be preserved. In the literature, hold in for such a circumscribed reformagenda is often back up by a belief that theeurozone crisis was primarily the result of excessivefiscal dissolvinginthe periphery member states (Sinn 2010). Of course, the distinct lack ofpolitical integration see here would mean that channels of electivelegitimacy would await largely indirect via member state governments. Through thisdiscussion of the literature, two reform scenarios for EMU have beenidentified intergovernmental and supranational. These two models can beunderstood as being supported by a selection of d ifferent policyframes,implying different definitions of what theproblem is and different ideas of what the commensurate policy solutionsmay be (see Table 1). First, the intergovernmental reform scenario is direct by a simplistic fiscal profligacy diagnosis of the eurozone crisis. Suchan interpretation of the crisis strongly implies neoliberal policy solutions inthe form of strengthened rules-based fiscal discip word of mouth. Framing the crisis inthese more limited terms may also be both politically and intellectuallyattractive. This is because these frames do not demand challenging integrationsteps being taken towards a deeper level of fiscaland political union. Alternatively, the more far cave ining supranational reform scenario is informed by a broader interpretationof the crisis problem as a problem of regional imbalances. In turn, possiblesolutions are understood as release far beyond neoliberal fiscal discipline inthe direction of the implementation of neo-Keynesian solidar ity measures, including debtmutualisation and an enlarged EU budget. The take in to ensure the democratic legitimacy for finalitys taken at the Unionlevel is also problematized under this integration scenario, lead to demandsfor the simultaneous development of a flanking political union. Table 1 Framing the Eurozone Crisis Building on name deletedfor couple review Framing the Eurozone Crisis Crisis Escalation point Following the intensificationof the global financial crisis in July 2007, the eurozone was at firstconsidered by some to be a safe haven (Wyplosz 2009). With the full implications of the compound global financial crisis forthe eurozone not yet apparent, the crisis problem was initially frameby European leaders as one created externally by the financial excesses built-upwithin the Anglo-Saxon economies. As one DG ECFIN ex officio observed, Governmentsbelieved the crisis to have originated primarily in poor regulatory practicesin sensitive York and Londonand Europe w as being pulled into the crisis throughthe global financial system (secretariat Official in DG ECFIN 2 2013). Asimilar sentiment was also reflected in more communicative discourse asEuropean leaders attempted to externalise the crisis. The German Chancellor,Angela Merkel, was uncompromising in asserting to begin with the German Bundestag thatexcessively cheap money in the US was a driver of todays crises ( pecuniary propagation 2008). Moreover, French President, Nicolas Sarkozy, proclaimed in similarterms that the crisis was a product of the Anglo-Saxon model (Financial propagation2009). Despite Europeanleaders framing the 2008 financial collapse as an almost exclusivelyAnglo-Saxon phenomenon with epicentres in New York and London, Europeanleaders, led by Nicolas Sarkozy as the then acting president of the Council,did push for a strong unified European response alongside the G20 and Americaneconomies (Hodson 2011). In this early period, the framing of solutions to thecrisis in Eu rope, overlapping with the international response and IMFrecommendations, was guided heavily by Keynesian principles as leaders soughtto forestall financial contagion and recessionary spillovers into the real economythrough coordinated fiscal expansion. In Europe, this translated into anattempt to combine both national and EU resources to support demand and dampen economies from the worst effects of the financial meltdown (SecretariatOfficial in DG ECFIN 1 2013). In November 2008, after an howling(prenominal) summitof the euro area Heads of Government led by NicolasSarkozy, the Commission proposed a Keynesian EuropeanEconomic Recovery plan (ECRP), which championed a real(a) coordinatedfiscal stimulus The Commission isproposing that, as a affaire of urgency, Member press outs and the EU agree to an immediatebudgetary impulse amounting to 200 billion (1.5% of GDP)(Commission2008). Importantly though,a key principal underpinning the plan was that any budgetary stimulus should be timely, targeted, and temporaryandthat Member States should commit to remove the budgetary deterioration andreturn to the aims set out in the SGPs culture medium term objectives (Commission2008, 6-7). As Joaqun Almunia,Vice Presidentof the European Commission, commentedat the time we have red lines,we cannotputan excessiveburdenonthe next generation (Commission 2008a, 6).Similarly, the conclusions of the ECOFIN Council continued to support thelong-term application of the SGP we remain fully committed tosound and sustainable public finances. The Stability and Growth Pact providesadequate flexibility to deal with these exceptional situations (Council 2009).Thus, while European leaders led by NicolasSarkozy, along with the broader internationalcommunity, embraced more Keynesian orientated fiscal stimulus in order to counterthe evaluate downward trend in demand presented by the intensification of theglobal financial crisis, the long-term European commitment to the neoliberalrules-bas ed SGP framework remained relatively horse barn during this early crisisperiod. In the Spring of 2010 Grecian public debt wasdowngraded by the main credit rating agencies to junk status and a growingspread in yields emerged in Eurozone sovereign bonds (Checherita et al. 2010). Recalling these events later, PresidentVan Rompuy noted that this sudden loss of confidence in the Eurozone provokedby Greece was a real shock for which we were not prepared (Council 2014). Asone official in DG ECFIN remarked It was now internal a crisis of theEurozone (Secretariat Official in DG ECFIN 2 2013). As the crisis intensifiedwithin the eurozone it was reframed by European leaders as a problem of fiscalprofligacy amongst the periphery member states. On 11 February 2010, in a shortemergency bidding issued by Heads of State, they remarked that all euromembers must conduct sound national policies in accordance with the agreedrules (Council 2010). The discussion was also centred on Greece, with theGree k government being told to implement all these measures in a rigorous anddetermined manner to effectively reduce the budgetary deficit by 4% in 2010(Council 2010). From a reading of the coordinative discourse, it was nowGermany that was seen to be providing notional leadership for framing thecrisis in behavioural terms on Greek fiscal profligacy. As the largest eurozone country ofcourse Germanys voice was perhaps louder than the rest. I think it is fair tosay that there was a perception in Germany that the troubles in the sovereigndebt market had been caused by excessive government spending by certainperiphery member states. (Council Directorate for Economic polity Official2013). The Commissionalso concurred with these views. In fact, the EU administrator took theunprecedented step of issuing a series of strict recommendations to ensurethat the budget deficit of Greece was brought below 3% of GDP by 2012(Commission 2010a). Joaqun Almunia,Vice Presidentof the European Commission, commentedthat this is the first time wehave effected such an intense and quasi-permanent system of monitoring(Commission 2010a). In response to theescalating crisis in the eurozone, President Van Rompuy argued the case inMarch 2010 for the pre-eminence of a European Council led Task lastingness in drivingreform negotiations on EMU governance. The framing of policy solutions withinthe framework of the Task Force setting was guided more by a neoliberalideology towards the imposition of strengthened intergovernmental fiscaldiscipline. In the first statement issued by the Task Force on the 25 March2010, the shift in policy responses by European leaders was already firmly establish the current situation demonstrates the need to strengthen andcomplement the active framework to ensure fiscal sustainability in the eurozone (European Council 2010b). Moreover, the final conclusions of the March 2010European Council summit further instructed the Task Force to identify the measures neededtor eachtheobjectiveof an improved crisis resolutionframework andbetter budgetary disciplineexploringall options to honour the existing heavy framework (European Council2010a). Again, in the coordinativediscourse, officials pull attention to the renewed notional leadership competeby Germany in framing policy solutions for the crisis You have to understand that forGermany in particular the idea of having enforceable rules and sanctions tomaintain budgetary discipline is central to their vision of how EMU shouldoperate. And during the crisis it was Germany that pressed the hardest forheighted budgetary surveillance (Member of the cabinet for the European CouncilPresident, 2014). A set out officialcommented on what they perceived as the inevitably of Germanys principal role insetting the reform priorities within the task force But of course Germanytakes a leading role here in view of its economic size. So Germanyautomatically was seen to take on a leading role, whether it fateed it or not(Council Directorate for Economic indemnity Official 2013). In contrast, FrenchPresident, Nicolas Sarkozy led continued pleas for more fiscal solidarity Theeuro is our currency. It implies solidarity. There can be no doubt on the typeface of this solidarity (BBC 2010). However, while it has been observedthat France under the stewardship ofSarkozy also had a role to play here, it has been noted that he, in effect,was forced to concede too many of Germanys demands during the crisisdeliberations (Council Directorate for Economic constitution Official 2013). Thus,while Nicolas Sarkozy played an important role in leading a more Keynesian internationalresponse at the onset of the global financial crisis, as the crisis intensifiedwithin the eurozone the French President was forced to cast out solutionsinvolving fiscal solidarity in favour of Germanys more limited fiscaldiscipline objectives. These framingpriorities were reflected in the Final Report of the Task Force released to thepublic in October 2010. The main pillar of the suggested reforms was gearedtowards greater fiscal discipline through a stronger stability and growthpact (European Council 2010, 3-4). Aspart of its ongoing institutional dialogue with the Task Force, the ECB alsooffered its public support for legislative measures supporting a more rigorousquasi-automatic implementationof the SGP rules (ECB 2010). third key objectives were embedded in theFinal Report of the Task Force the need for a greater focus on debt andfiscal sustainability, to reinforce compliance and to ensure that nationalfiscal frameworks reflect the EUs fiscal rules (European Council 2010, 1-12).In remarks following the final meeting of the Task Force, President Van Rompuy enter that the task forces commitment to a stronger Pact was high fromthe beginning to the end (European Council 2010c). Converging with the framingactivities of the Task Force, inSeptember 2010 the Commission proposed the so-called six pack of legislat ive proposalscentred on the concept of prudent fiscal political (Commission 2010, 1). Thesefast-tracked proposals sought to strengthen the impact and effectiveness ofthe preventative arm of the SGP by giving it teeth (EU Commission 2010, 4-5).These early framing activities led by deliberations within the Task Force also helpedset the subsequent policy agenda in the form of a legislative two-pack(proposed in November 2011) and intergovernmental fiscal compact (agreed 8-9December 2011). Building on the legislative six-pack, both measures werelimited to strengthening intergovernmental fiscal discipline under the SGP,through strengthened budgetary surveillance and reinforced compliance (see Commission2012). Crisis Normalisation Phase From the summer of 2012to the winter of 2013 there was a gradual reduction in the eurozone peripherybond yield spreads. Key here was the ECB fulfilling itsfunction as a lender of last resort (De Grauwe 2013 2016). With the ECB ableto temporarily normalise market reactions within the eurozone, it offered theprospect that European leaders may seek to reframe the crisis as demanding moresupranational solutions. This assumption appeared to be confirmed whenPresident Herman Van Rompuy, following a European Council summit at the end ofJune 2012, first celebrateed the prospect of laying down a longer-term visionfor strengthening EMU (European Council 2012c). Following prior negotiations in the European Council, PresidentVan Rompuy, jointly with the Presidents of the European Commission, the ECB,and the Eurogroup, presented in December 2012 a compensate entitled Towards aGenuine Economic and Monetary Union.However, despite the accident of a detailed juncture event, the framing of policysolutions within the report continued to rate the strengthening ofintergovernmental fiscal discipline over the short-term. Thenear term anteriority is to complete and implement the new steps for strongereconomic governanceThe other elements related to st rengthening fiscalgovernance in the euro area (Two-Pack), which are still in the legislativeprocess, should be finalised urgently and be implemented exhaustively (EuropeanCouncil 2012, 8).These reformpriorities were also reflected in the coordinative discourse The priority hasremained the implementation of the measures contained in the six-pack and two-packproposals (Council Directorate for Economic insurance policy Official 2013). And again,Germanys ideational leadership in framing policy solutions was observed to bepivotal here There is an understanding amongst member states that budgetdiscipline has to be ensured before more financial support can be offered. Thisis also a German insistence (Council Directorate for Economic Policy Official,2013). Moreover, while the ECB internally called for a quantum leap inintegration within EMU, this was strictly interpreted in terms of furtherstrengthening the budgetary discipline of the euro area Member States (ECB20128). When discussingthe reform solutions for implementation over the long-term (five age andmore), there was a shift in the discourse of the Towards a Genuine Economicand Monetary Union report towards the language of supranationalism.However, these framing devices were only reflective of a limited reformambition. For example, the report mentions the possibility of graduallydeveloping a fiscal mental object, which could help cushion the impact ofcountry-specific shocks and prevent contagion across the euro area (EuropeanCouncil 2012, 9). Yet the precise form that any fiscal capacity should takewithin the euro area was left vague, with the report acknowledging that theexact conditions and thresholds for the activation of transfers would need tobe study carefully (European Council 2012, 11). Moreover, it was alsoemphasised that the development of a fiscal capacity within the eurozone should not lead topermanent transfersbetween countries and that thisprocess should occur without resorting to the mutualisa tion ofsovereign debt (European Council 2012, 10-12). Tellingly, within thesubsequent Conclusions of the December 2012 European Council, any mention of afiscal capacity or shock absorption function for EMU was omitted, along withplans for debt-mutualisation (European Council 2012a). In thecoordinative discourse, officials were able to account for the limited ambitionshown in framing supranational solutions to the eurozone crisis by pointingtowards a confection of reign concerns and issues of moral infer amongstmember states. For example, one official highlighted the constraining influenceof these national interest ideas on integration within EMU A degree of debt mutualisation or financial risk sharing could, intheory, help lower borrowing costs amongst the periphery member states and helpward off pressure from the financial markets butit effectively means the transfer of sovereignty, at least to some extent. Thatis the biggest obstacle that is what it is all about. In the end it c omes downto sovereignty and money (Council Directorate for Economic PolicyOfficial 2013).Similar ideas wereraised by one official who, when asked to comment on the probability ofsecuring supranational fiscal integration, answered candidly I think it is not very probable because of statesovereignty concerns ( consultant to the Cabinet of the European Council President2014). The official argued that this is because a fiscal union with tax powersgoingto the European Union level would be completely turning upside down the way theUnion is currently running (Advisor tothe Cabinet of the European Council President 2014).A separate official also drew attention to the importance of concerns of moralhazard, predominantly amongst the core member states who want to be able toinfluence the periphery member states debt situation (Member of the Cabinet for the European CouncilPresident 2014). There were also discussions in the Towards a Genuine Economic andMonetary Union report concerning the dev elopment of aflanking political union aspect, although again the supranational framing ofthe discourse was lacking in ambition. Inorder to underpin the democratic legitimacy and answerability of decisionmaking the report called for the the involvement of the European Parliament asregards accountability for decisions taken at the European level, while at the kindred time maintaining the pivotal role of national parliaments, asappropriate (European Council 2012, 16-17). The telephone to maintain apivotal role for national parliaments, even in the event of a verticaltransfer of powers to the European level, would appear to stem from anobservation made in the report that decisions on national budgets are at theheart of Member States parliamentary democracies (European Council 2012, 16).The report, then, explicitly divorced itself from supranational politicalsolutions. In the coordinative discourse, sovereignty concerns were againraised as major hurdle to political integration People ha ve different interests and different concepts of what apolitical union would be and as to what sovereign powers should be transferredaddingthat we are not even discussing this (Council Directorate for EconomicPolicy Official 2013).In November 2012 the Commission published its own Communicationoutlining A blueprint for a deep and bona fide economic and monetaryunion Launching a European Debate. Converging with the Van Rompuy report, theimmediate framing of policy solutions was restricted to fiscal disciplineobjectives immediate priority should be given tothe full deployment of the new economic governance tools brought by the six-packas well as rapid adoption of current Commission proposals such as the two-pack(Commission 2012, 12). Once again, like the Van Rompuy report, theblueprint did guardedly embed more supranational frames when addressing thelong-term reform agenda for EMU (five years and more). This is in keepingwith the EU Commissions pact that steps towards more responsib ility andeconomic discipline should be feature with more solidarity and financialsupport (EU Commission 2012, 11). Accordingly, the framing of solutionsshifted to demand more in the way of fiscal solidarity, with tentative ideasfor a fiscal capacity (or federal budget) and even debt mutualisationschemes being aired as possibilities tosupport member states in the absorption of economic shocks (Commission 2012,25-26). However, these solidarity mechanisms were envisioned as being implementedstrictly after the new arrangements for fiscal discipline have been fullyimplemented. Also, the procedural details and legal basis for the solidaritymechanisms was left vague, with proposal covering options from contractualarrangements to an insurance type system. As one official commented Ithink there needs to be some ingredients of fiscal union. Its not entirelyclear which ones and to what extent there are different views and these aretricky questions ( elderberry bush Fiscal Policy Advisor in DG ECFIN 2013).Moreover, the blueprint also shied away from committing itself to any processof supranational political integration, with the EU Commission arguing that thethe Lisbon Treaty has meliorate the EUs unique model of supranationaldemocracy (Commission 2012, 35). In June 2015, thePresident of the Commission, in close cooperation with the Presidents of theCouncil, the ECB, the Eurogroup and the European Parliament, presented theso-called Five Presidents Report entitled Completing Europes Economic and Monetary Union. It is notable thatin the updated report the framing of policy solutions for fiscal integrationwas even less thought-provoking than it had been in earlier institutional reportsdrafted during earlier periods of the crisis. Apart from repeating theneed to improve compliance with the new rules contained in the six-pack,two-pack and Treaty on Stability, Coordination and brass, there were noinstitutional innovations suggested for implementation over the short-term.Ins tead, intergovernmental fiscal discipline was again framed as thepriority solutionwith repeatedreferences made to responsible budgetary policies (Commission 2015, 14). Thereport also warned that every Member State must stick to the rules, or thecredibility of this framework is at risk (Commission 2015, 14-15).In terms of the framing of solutions over the longer-term(five years or more), previous references to a fiscal capacity and limitedforms of debt mutualisation were completely omitted. Instead, the FivePresidents tentatively floated the idea of a euro area-wide fiscalstabilisation function (Commission 2015, 14-15). Postponed strictly for inthe longer term, the development of such afunction is envisioned as the culmination of a process of convergenceand further pooling of decision-making on national budgets (Commission 2015,14-155). The report also cautioned thatit should not lead to permanent transfers between countries and that effortsshould be made to guarantee it is consonan t with the existing EU fiscal framework(Commission 2015, 15). Tellingly the report was also explicit that the exact design of sucheuro area stabilisers requires more in-depth work (Commission 2015, 14). Aspart of the Commission Presidents 2015 State of the Union address, he arguedfor a more effective and democratic system of economic and fiscalsurveillance (Commission 2015a). However, there was again a noticeable lack ofprogress on political union. While the report affirmed a key rolefor the European Parliament and national Parliaments, practical steps toensure the democratic legitimacy of decision making were limited to proposalsto consolidate the external representation of the euro and the integrationintergovernmental solutions (i.e. Treaty on Stability, Coordination andGovernance) within the EU legal framework (Commission 2015, 17-18).Framing in mount Thedominant framing activities uncovered need to be understood in the context ofthe wider EMU policy environment. One of the keyf oundations of EMU was the ideational consensus reached in Europe on neoliberaleconomic principles in the 1980s (McNamara 1998). However, while theredeveloped a relative consensus that monetary policy would function inaccordance with neoliberal principles, very little thought was given during thedeliberations at Maastricht on the 1992 Treatyon European Union (TEU) as to the possibility of accompanying theseintegration steps with progress towards a supranational fiscal union. As Verduncommented Fiscal policy harmonizationwas just simply one step too far there was no support for a transfer ofsovereignty over these matters to the European level (Verdun 1998, 122). Froman early stage, therefore, political necessity dictated that fiscal policywould remain firmly in the intergovernmental realm. Yet from the perspective ofunderpinning EMU with an institutional framework that is in keeping withneoliberal ideas of sound money and sound finance (Dyson 2002), Europeaneconomic and monetary inte gration was not completed at Maastricht. It was against this backdrop that the then German Ministerfor finance, Theo Waigel, advanced a proposal for a rules-based Stability Pactfor Europe in 1996. In summary, owning to the political constraints preventingfiscal supranationalism, coupled with the importation of neoliberal ideas,intergovernmental fiscal discipline became institutionalised at heart of EMUearly on. Sinceits formation, the course of EU fiscal governance reform has been characterisedby a strong path-dependency (Pierson 1996). In fact, in view of thepath-dependent constraints of the political environment, on top of theprevailing neoliberal ideational consensus, the rules-based framework for EUfiscal governance was never seriously challenged by European leaders throughoutthe first ten years of the single currency area (see Heipertz and Verdun 2011. While the onset of the eurozone crisis had thepotential to represent a critical juncture in the path for EMU integration(Bulmer 1994), the revival of concerns amongst member states over sovereigntyand moral hazard have continued to render the intergovernmental structure ofEMU a political necessity. However, although the minimal structure of EMUremains a manifestation of different conceptions of national interest, theprevailing neoliberal ideology has simultaneously continued to conditionperceptions as to the efficacy of the SGP rules-based framework for fiscaldiscipline.Thus,while French President Nicolas Sarkozy, in tandem with the internationalcommunity, was seen to be influential in leading a brief resurgence of more Keynesian oriented demandstimulus during the early stages of the crisis, European leaders defended thecontinued application of the SGP as the overarching framework for EU fiscalgovernance. The dramatic shift in early 2010 from Anglo-Saxon externalexcesses to the internal vulnerabilities within the eurozone only exaggeratedthe path-dependent effect of competing national interests amongst memb er stateswhile reinforcing the reversion to neoliberal solutions. First, policy makers were responding with a degree of shockand panic to a crisis of potentially existential proportions (as termed by aMember of the Cabinet for the European Council President, 2014). Operating inthis environment of crisis, diagnosing the crisis in behavioural terms asresulting from fiscal profligacy and offering intergovernmental reformsolutions limited to strengthening the SGP would have been both intellectuallyand politically attractive. Not only were thesepolicy frames fully in line with theneoliberal logic of soundmoneyandfinance enshrined since Maastricht (Dyson 2002), but they could also be implementedvia secondary legislation under the current legal basis provided by the SGPframework. Moreover, buttressed by its economic burthen and its coarsestructural power within the EMU set-up, Germany was also increasingly in astrong position to provide ideational leadership in framing neoliberalsolution s to the crisis. This can be contrasted with France who, as the crisisprogressed, was forced to abandon more Keynesian solutions in favour ofGermanys more limited fiscal discipline objectives. Conclusion The intensificationof the crisis within the eurozone brought with it a marked intensification ofintergovernmental policy coordination within EMU. As the crisis progressed, theresponse by European leaders was to adopt problem and solution framessupporting intergovernmental fiscal discipline. Importantly, these frames wereintellectually attractive as they were fully consistent with the neoliberalfoundations underpinning EMU governance. Also, these frames were politicallysimple to evince as they could be implemented in full under the pre-existing SGPlegal framework. While there was a partial shift in the discourse towardssupranationalism following the normalisation of the crisis, these discourseswere always reflective of a limited reform ambition. In this context, a supranationalframi ng of the crisis was found to be limited by constraining ideas of nationalinterest concerning state sovereignty and issues moral hazard. Germany was alsoable to draw on its economic weight and bargaining power to provide ideationalleadership, further directing the reform agenda towards intergovernmental fiscaldiscipline. In relation to thewider literature, these findings are broadly consistent with new intergovernmentalist claims thatsupranationalism is unlikely to be obtained in the post Maastricht integrationphase. This study though has helped develop a deeper politicalunderstanding of the current integration impasse in EU fiscal governance, andof the ideational and institutional path-dependencies on the job(p) to limit thescope for far reaching reform. This analysis has also contributed to existingcritical analysis on European integration by emphasising the central importanceof neoliberal ideology in guiding framing preferences. Finally, one majorconsequence of these findings is that the imbalance between monetary and fiscalintegration within the EMU framework will likely remain. However, further probe will be needed to assess the long-term sustainability of running asingle currency area with a decentralised system of fiscal policy.References Aday, S. 2006. The Framesettingeffects of news An experimental test of advocacy versus objectivist frames. daybookism and quite a little Communication Quarterly 83 (4) 767-784.BBC. 2010. France offers support to Greece 7 March. Available at http//news.bbc.co.uk/1/hi/business/8554754.stm Accessed 22 January 2017Benford, R. D. and Snow,D.A. 2000. Framing Processes and SocialMovements An Overview and Assessment. yearlyReview of Sociology, 261, 611-639.Bickerton, C.J., Hodson, D. and Puetter,U. 2015. The New Intergovernmentalism European Integration in thePost-Maastricht Era. diary of Common commercialise Studies 53 (4) 703-722.Bickerton, C.J., Hodson, D. and Puetter,U. eds. 2015a. The NewIntergovernmentalism States a nd Supranational Actors in the Post-MaastrichtEra, Oxford Oxford University infatuation.Bofinger, P.,Feld, L.P., Franz, W., Schmidt, C.M., and di Mauro, B.W. 2011. A EuropeanRedemption Pact. CEPR Policy Paper, 9 November. Cacciatore, M.A., Scheufele, D.A. and Iyengar, S.2016. The End of Framing as we Know itand the Future of Media Effects. Mass Communication and Society. 19(1) 7-23.Checherita,C., Attinasi, M. and Nickel, C. 2010. What explains the surge in euro-areasovereign spreads during the financial crisis of 2007-09? ECB Working Paper,no. 1131. Commission. 2008.Communication from the Commission to the European Council A EuropeanEconomic Recovery Plan 26 November, Brussels. Commission.2010. Press release, EU economicgovernance The Commission delivers a comprehensive computer software of legislative measures29 September, Brussels. Commission. 2010a.Press Release Commission assesses Stability syllabus of Greece 3February, Brussels.Commission .2012.A blueprint for a deep and ge nuine economic and monetary union Launching aEuropean Debate 30 November, Brussels.Commission .2015.Completing Europes Economic and Monetary Union 22 June, Brussels Commission.2015a. Speech by blue jean Claude Junker State of the Union Address 14September, Brussels. Council. 2010.Statement by the Heads of State or Government of the European Union 11February, Brussels. Council. 2014. Speech by President Herman Van Rompuy at the Brussels EconomicForum 10 June, Brussels. De Grauwe, P.2013. Design Failures in theEurozone Can they be fixed? LEQS Discussion Paper, No. 27.De Grauwe, P..2016. Economics of Monetary Union, 11thEdition. Oxford Oxford University Press. Dyson, K. 2002. The government activity of the Euro-Zone Stability or equipment failure? Oxford Oxford University Press. ECB.2010.Reinforcing Economic Governance in the EuroArea, note by the European Central Bank, Frankfurt, 10 June.ECB.2012. Opinion of theEuropean Central BankonStrengthened Economic Governance of the EuroArea Frankfurt, 7 March. European Council.2010a. European Council Conclusions, 17-18 March, Brussels. European Council.2010b. Statement by the Heads of State and Government of the Euro area, 25March, Brussels.European Council.2010c. Remarks by the President of the European Council following the lastmeeting of the Task force on economic governance, 18 October, Brussels.EuropeanCouncil .2012. Towards a Genuine Economic and Monetary Union, 5 December,Brussels. European Council.2012a. European Council Conclusions, 13-14 December, Brussels. EuropeanCouncil. 2012b. Towards a Genuine Economic and Monetary Union Interim Report,12 October, Brussels.European Council.2012c. Remarks by President Herman Van Rompuy following the European Council,29 June, Brussels. Feldstein, M.2008. Will the Euro Survive the Current Crisis?Project Syndicate Paper, 15 December.Financial Times. 2008. Merkel sees danger in cheap money, 27 November. Available athttp//www.ft.com/cms/s/0/67467116-bc25-11dd 79fd18c.html? =t rue Accessed 17January 2017Financial Times. 2009. Seeds of its Own death, 8 March. Available at https//www.ft.com/content/c6c5bd36-0c0c-11de-b87d-0000779fd2acAccessed 18January 2017Goffman, E. 1974. Frame summary An Essay on the Organizationof Experience. New York Harper and Row. Hay C. 2006. Constructivist Institutionalism,In The Oxford Handbook of PoliticalInstitutions, edited by Rhodes, R, 3-23. Oxford Oxford Oxford UniversityPress. Heipertz, M. andVerdun, A. 2011. Ruling Europe The Politics of the Stability and GrowthPact.Cambridge CambridgeUniversity Press. Hodson, D. 2011. Governing the Euro Area in Good Times and Bad. Oxford OxfordUniversity Press.Holden, P. 2011. A Dictionary of International TradeOrganizations and Agreements. London Routledge. McNamara, K. R.1998. The Currency of Ideas Monetary Politics in the European UnionNew York Cornell University Press.Pierson, P. 1996. The path to Europeanintegration a historical institutionalist approach. Comparative Political Stud ies 29(2) 123-163.Puetter, U. 2012. Europes deliberative intergovernmentalismthe role of the Council and European Council in EU economic governance.Journal of European Public Policy 11(2) 161-178Rosamond, B. 2005. The uniting of Europeand the foundation of EU studies revisiting the neofunctionalism of Ernst B.Haas. Journal of European Public Policy12 (2) 237-54.Schmidt, V. A.2008. dianoetic Institutionalism The Explanatory Power of Ideas andDiscourse. Annual Review of PoliticalScience 11(1) 303-326.Schmidt, V.A. 2010. victorious ideas and discourse seriously explainingchange through discursive institutionalism as the fourth part new institutionalism.European Political Science Review.2(1) 1-25.Schmidt, V.A.2015. The Eurozones Crisis of Democratic authenticity Can the EU RebuildPublic Trust and Support for European Economic Integration? EuropeanCommission Discussion Paper, No. 015, September. Schimmelfennig, F. 2015. Whats the news show inNew Intergovernmentalism? A Critique of B ickerton, Hodson and Puetter. Journalof Common Market Studies 53(4) 723-730.Sinn, H.W. 2010. Reiningin Europes Debtor Nations. Project Syndicate Paper, 23 April. Skidelsky, R. 1992. John Maynard Keynes The Economist as Saviour 1920 1937. LondonMacMillan.Verdun, A. 1998. Understanding Economicand Monetary Union in the EU. Journalof European Public Policy 5(3) 527-33.von Hagen,J., Schuknecht, S. and Wolswijk,G.2009. European government bond spreads in the current crisis. CEPR Policy Paper, 21 December. von Hagen,J., Schuknecht, S. and Wolswijk,G.2011. Government bondrisk premiums in the EU revisited The impact of the financial crisis. EuropeanJournal of Political Economy 27 (1) 36-43.Worlf, G.B. 2012. A budget for Europes Monetary Union. BruegelPolicy Contribution, Issue 12/22.Wyplosz, C .2009. The Euros Finest instant? IMF Opinion,June 09. CitedPersonal Interviews Councilof the European Union Council Directoratefor Economic Policy Official. 2013. Interviewed by the causality (Brus sels, 27thSeptember). aged(a) official inthe unit for economic policyCouncilDirectorate for Economic Policy Official 1. 2013. Interviewed by the author(Brussels, 28th September).Official in the unitfor economic PolicyAdvisor to theCabinet of the European Council President. 2014. Interviewed by the author(Brussels, 4th April).Senior consultant tothe PresidentMember of theCabinet for the European Council President. 2014. Interviewed by the author(Brussels, second April).Senior advisor tothe President on economic and euro area issuesEUCommissionSecretariatOfficial in DG ECFIN 1. 2013. Interviewed by the author (Brussels, 26thSeptember).Part of theCommission provided SecretariatSecretariatOfficial in DG ECFIN 2. 2013. Interviewed by the author (Brussels, 25thSeptember).Part of theCommission provided Secretariat Official in DGECFIN (2013) Interviewed by the author (Brussels, 25th September). Fiscal policyofficialPolicy Advisor inDG ECFIN (2013) Interviewed by the author (Brussels, 24thS eptember).Adviser on policycoordination and strategic planning Senior FiscalPolicy Advisor in DG ECFIN (2013) Interviewed by the author (Brussels, 23rdSeptember).Senior fiscalpolicy advisor SeniorDirector in DG ECFIN (2013) Interviewed by the author (Brussels,26th September).Senior official incharge of coordination work in DG ECFIN 1 name deleted for peer review. 2 Informed by the wider new institutionalism literature, this broader theoretical exploration charts the ideationalas wellinstitutional path dependences working to limit the scope for reform within EMU (Bulmer 1994 Pierson 1996 Hay, 2006).