Searching under the lamp-post: the evolution of fiscal surveillance

Why is the Euro area economy laboring under the burden of fiscal austerity? Critics argue that an ideological bias towards austerity has been institutionalized in the EU’s fiscal rules. We examine this claim by contrasting a ‘disciplinarian’ account of fiscal surveillance with a welfare-maximising approach and using this to review how fiscal surveillance by the European Commission has been practiced since the financial crisis. While we find that Eurostat’s practices bear some marks of disciplinarianism, particularly in bringing the fiscal consequences of reckless behavior by banks into the beam of the fiscal surveillance lamp, the Commission’s welfare maximising orientation is reflected in its efforts to identify and partition out financial, macroeconomic and budgetary contributions to fiscal outturns and thereby avoid an excessively disciplinarian orientation. Its efforts are impeded by a lack of supranational institutions to resolve bank failures and conduct countercyclical policy. These institutional deficits, rather than an entrenched ideological standpoint, explain the persistence of austerity.