The Political Determinants of Fiscal Governance in the EU: Towards a New Equilibrium

The article investigates the political determinants of fiscal governance in the EU. Since the outset of the Economic and Monetary Union, the EU adopted a model of fiscal regulation which attempted to keep government debt and deficit in check to avoid “fiscal dominance.” With the 2020 pandemic, the EU suspended the fiscal rules and adopted a program, Next Generation EU, having some features of a central fiscal capacity. On the bases of comparative federal analysis, the article discusses the political conditions that preside over the formation of a stable central fiscal capacity, here conceptualized as the “triple‐T model.” We argue that, in unions of states, the determinants of a central fiscal capacity consist in the appearance of an existential threat, in the reciprocal trust among national governments for answering the threat with central resources, and an adequately long time planning horizon of national policymakers to apprehend the benefits of those common resources for all member states. On these bases, the article outlines the contour of a new EU fiscal set up which encompasses an EU central fiscal capacity and robust budget rules framing the fiscal choices of national authorities.