Doing Away with the Sovereign: Neoliberalism and the Promotion of Market Discipline in European Economic Governance

Abstract

This article proposes a critical reading of market discipline and its limitations as a mechanism in European economic governance. Consistent with neoliberal beliefs about market-based governance, the Economic and Monetary Union (EMU) is premised on the functioning of the government bond market as a fiscal-policy discipliner. However, the operation of market discipline requires that neither governments nor their private creditors can rely on an authority to bail them out. It therefore precludes the kinds of intervention by Eurozone's supranational institutions witnessed during the euro crisis. In the post-crisis context, efforts to strengthen market discipline continue to be frustrated by the growing reliance of financial institutions on government bond markets as well as the European Central Bank's (ECB) active participation in those markets. Having undermined the credibility of the market as an autonomous and apolitical mechanism of discipline, European economic governance struggles to come to terms with the rise of a supranational 'economic sovereign' in the Eurozone.

The Eurozone’s Evolving Fiscal Ecosystem: Mitigating Fiscal Discipline by Governing Through Off-Balance-Sheet Fiscal Agencies

“…Given this double disciplinary bind, the rules for fiscal governance implemented in the Eurozone 1.0 have often been referred to as 'neoliberal'. 3 In this understanding, the main aspects of the neoliberal thrust of Eurozone governance are a restrained or downscaled role for the state in economic affairs and an emphasis on (free) markets as the ultimate arbiter of public policies (Gill 1998, Van Apeldoorn 2009, Ojala 2020. In broad terms, we agree with this description, but we want to take the analysis further and spell out what this would mean for the governance of the Eurozone fiscal segment.…”

Zombi rahaliitossa

“…Oppi oli vaikutusvaltainen EMU:a perustettaessa, jolloin markkinat saivat erityisen tehtävän valuutta-alueen vakauden ylläpitämisessä (Gill 1998). Vaikka markkinakuri on euron lyhyen historian aikana useaan kertaan osoittautunut toimimattomaksi taloushallinnan mekanismiksi, sen idea putkahtaa toistuvasti esiin erilaisissa politiikka-aloitteissa (Ojala 2021). Myös Petteri Orpon hallitusohjelman EU-poliittinen linjaus peräänkuuluttaa jälleen kerran markkinakurin palauttamista euroalueelle (valtioneuvosto 2023).…”

“…Tästä huolimatta markkinakuri on ollut näkyvästi eurooppalaisten poliitikkojen, viranomaisten ja asiantuntijoiden agendalla. Markkinakuria on toistuvasti esitetty keinona hillitä julkista velkaantumista tilanteessa, jossa EU-instituutiot eivät pysty sanelemaan yksittäisen jäsenmaan finanssipolitiikkaa ja jossa sitoutuminen yhteiseen sääntökehikkoon on osoittautunut heikoksi (Ojala 2021). Sitä ovatkin pitäneet esillä erityisesti tahot, jotka kokevat julkisen velan uhkaavan euroalueen vakautta (Ojala 2023).…”

Governing public investment in Europe: The politics of off-balance-sheet policymaking, the rise of Eurostat and contrasted regional policies in Belgium

“…The politics of EU fiscal ecosystems: A policy instrumentation approach to off-balance-sheet policymaking Two main theses compete in the literature on European fiscal governance. On the one hand, numerous studies have stressed the neo-(or ordo-) liberal nature of the Economic and Monetary Union (EMU) (Gill, 1998;Lovering, 2023;Ojala, 2021;Ryner, 2015). European treaties commit national governments to fiscal orthodoxy and market discipline by prohibiting monetary financing 4 and 'excessive' public deficits (as operationalized in the Stability and Growth Pact -SGP) and by including a strict no-bailout clause.…”