Published online by Cambridge University Press: 12 May 2014
This article analyzes the political origins of differences in adherence to the fiscal framework of the European Union (EU). It shows how incentives to use fiscal policy for electoral purposes and limited budget transparency at the national level, combined with the need to respond to fiscal rules at the supranational level, interact to systematically undermine the Economic and Monetary Union through the employment of fiscal gimmicks or creative accounting. It also explains in detail how national accounts were manipulated to produce electoral cycles that were under the radar of the EU budget surveillance system, and concludes with new perspectives on the changes to (and challenges for) euro area fiscal rules.
Department of Government, Harvard University (email: firstname.lastname@example.org); Department of Economics, University of Copenhagen (email: David.Dreyer.Lassen@econ.ku.dk); Department of Government, London School of Economics and Political Science (email: email@example.com). We thank John Verrinder and especially Agota Krenusz for advice about Eurostat data. For comments or sharing data we thank Alberto Alesina, Roel Beetsma, Marco Cangiano, Tom Cusack, Achim Goerres, Mark Hallerberg, Tim Irwin, Mark Kayser, Vincent Koen, Ian Lienert, Gian Maria Milesi-Ferretti, Mike Seiferling, Francesco Trebbi, Paul van den Noord, Anke Weber and Joseph Weber, and seminar participants at Boston College, the University of Copenhagen, the Hertie School of Governance, Princeton, Stanford, the annual meeting of the European Political Science Association, and a conference hosted by the International Monetary Fund and the Swedish Ministry of Finance. Verena Kroth, Linnea Mills, Ed Poole and Soledad Prillaman provided research assistance. For financial support Wehner thanks the London School of Economics and Political Science Research Committee Seed Fund and STICERD, Alt thanks Harvard's Weatherhead Center and Lassen thanks the Economic Policy Research Network. The authors alone are responsible for any errors or misinterpretations. Online appendices and data replication sets are available at http://dx.doi.org/doi: 10.1017/S0007123414000064.