European economic governance through fiscal rules

The European Union has been one of the most enthusiastic proponents of fiscal rules. Following the European sovereign debt crisis, the EU did not embark on a wide-scale governance reform with the aim of creating a fiscal union; rather, it started to cement the original architecture that had been built upon fiscal rules. By applying the conceptual framework of liberal intergovernmentalism, the article argues that the choice between stronger rules on the one hand and deeper fiscal integration on the other hand has been basically determined by German preferences. With the help of the simple model of warof-attrition, the article shows that core countries managed to strengthen the rules-based economic policy framework of the EU to the extreme.