The Contentious Creation of the Regulatory State in Fiscal Surveillance

Abstract: This paper analyses how the EU regulatory state expands into fiscal surveillance and what conflicts arise in the process. That the EU should have gone down the route of regulating budgets is puzzling. In Majone's original concept, the regulatory state is meant not to interfere with member states' budgetary redistributive policies. Yet the revision of the Pact strengthened the regulatory content of fiscal surveillance by reformulating the policy problem, strengthening delegated monitoring by the Commission, with Eurostat rather than DG Ecfin at its helm, and by extending control through specialised information. The analysis implies that the revision of the Pact in March 2005 cannot simply be dismissed as a watering down of its fiscal rules. However, there are limitations to regulatory expansion. One limitation is the inherent tension between the requirements of control and the economic justification of fiscal rules, another that economic justifications remain ambiguous and contentious.