An ever closer Economic and Monetary Union? Integrational dynamics in the Fiscal and Banking Union in a post-crisis era

Abstract: The study reformulates neofunctionalism as a theory of regional integration by adding insights from liberal intergovernmentalism and the theory of incomplete contracts which has been developed in new institutional economics. This framework is then applied to the integration processes that have been undertaken in the Economic and Monetary Union (EMU) of the European Union (EU) since the outbreak of the financial crisis in 2008. The hypotheses derived are checked for their consistency with the most prominent policy proposals issued by the presidents of the core institutions of the EU and then tested on actual integrational moves in the Fiscal and Banking Union – two policy fields where competences have extensively been transferred since the financial crisis. Integration in fiscal policies has been driven both by the introduction of new enforcement mechanisms as well as a redefinition of the contracts between the member states and the supranational institutions, especially the ECB. In the sphere of the Banking Union, a completely new governance framework has been introduced that shifts competences to the European level. It is shown that despite considerable member state hesitation to deepen EMU, the mechanism of functional spillover is able to explain recent developments.