With the Lisbon Treaty, the European Parliament (EP) obtained co-decision rights in economic governance for the first time. Soon afterwards, the outbreak of the eurozone crisis required a reform of the Economic and Monetary Union (EMU). When negotiating EMU reform, the EP sought to push its rights beyond the Lisbon provisions, so as to obtain an informal institutional change to its benefit. How and under which conditions did the EP extend its informal powers successfully â and when did it fail? By focusing on two crucial strategies â delaying and arena-linking â we compare instances of EMU reform where the EP succeeded in reaching an informal empowerment to cases where it failed. We find that the urgency of decision-making and its distributional consequences influence the EPâs chances of success. While urgency plays a crucial role in times of crisis, distributional consequences come to bear in policies where core state powers are at stake.
Introduction
In recent decades the EP has been extremely skilful in pushing forward its institutional agenda in the direction of widening its formal and informal powers (Hix and HĂžyland 2013). Under the Lisbon Treaty, the EP was given new formal competences in some areas of EU economic governance, and it has subsequently attempted to extend these powers informally to other areas â albeit with varying success (Fasone 2014; OâKeeffe, Salines, and Wieczorek 2016; Rittberger 2014). Therefore, we ask: How and under which conditions did the EP extend its informal powers successfully â and when did it fail?
In answering this question, we draw on a bargaining theory of institutional change. We argue that the EP made extensive use of two crucial bargaining strategies, namely delaying and arena-linking. Yet, as we show in the article, these strategies do not work under all circumstances. While the success of delaying depends on the urgency of the issues under negotiation, arena-linking only works if it does not imply significant distributional consequences for the more powerful member states.
In order to obtain our results, we compare instances of EMU reform in which the EP succeeded in reaching informal institutional change in its favour to cases in which it failed to do so. Based on original interview material, we focus on the most important measures of eurozone crisis management, namely the âSix-packâ legislation, the European Stability Mechanism (ESM), the Fiscal Compact and the Banking Union.
The article thus adds to two different strands of literature. First, by investigating the conditions under which the EP succeeds in expanding its institutional powers, we contribute to the research on the EPâs (self-)empowerment (Hix and HĂžyland 2013; Farrell and HĂ©ritier 2003; Rittberger 2003) and its informal involvement in EU politics (Reh et al. 2011). Second, the article adds to ongoing research on the EPâs current role and power in EMU (Bressanelli and Chelotti 2018; Crum 2018; Fromage 2018; Warren 2018).
In a first step, we will present our theoretical approach and derive our expectations. The second step will then be devoted to the empirical analysis. The conclusion summarizes our argument and contextualizes the empirical findings.
Changing institutional rules: a power-based bargaining explanation
When analysing the EPâs efforts to extend its institutional powers, we base our argument on bargaining theories of institutional change (HĂ©ritier 2007). At the micro-level, we assume that actors are boundedly rational and do not have perfect information as they face cognitive limits and transaction costs of information collection. Moreover, actors seek to maximize their institutional power in order to increase their influence over policy outcomes. At the macro-level, we assume that actors interact in a given institutional context. We understand institutions as sets of man-made rules of behaviour that facilitate and restrict social interactions (North 1990). They guide interaction in the accomplishment of joint tasks, such as legislation, and they allow actors to incorporate expectations regarding the actions of others into their own decision-making (Lake and Powell 1999). We specifically focus on the question of what the distributional implications of institutional rules are, how a change of rule comes about, who it favours and who it disadvantages (Knight 1992; Snidal 1996, 125).
Furthermore, we regard institutional rules as incomplete contracts. Incompleteness flows not only from bounded rationality and the high transaction costs of collecting information, but also from the diversity of interests of those actors that are negotiating the initial formal rule. In order to lower transaction costs of negotiating, and â given diversity of preferences â to allow for an agreement at all, actors often settle for rather vague formulations. As a result, the formal rule will be subject to renegotiation in the course of its application, and may thus give rise to a new informal institutional rule.1
Why some actors win out and others lose in these re-negotiations, is accounted for by the relative power of an actor as well as environmental conditions, such as the existing decision-making rule or an external shock (Knight 1995; Krasner 1991; Sebenius 1992). First, an actorâs available fall-back position should negotiations fail determines the new informal rule. The longer the time horizon of an actor, the lower the intensity of her preferences, and the more patient in the bargaining process she will be. Patience enables her to make credible threats with regard to one or more items of negotiation and thus enhances her overall position in the bargaining process (Knight 1992, 41f, 127â132). Second, the actorsâ formal institutional rights at t1 determine their ability to influence the outcome of the bargaining process (e.g. by setting the agenda or putting in a veto).
Hence, since pre-existing institutions lend strategic advantages to those who control them, any attempt to change them must surmount considerable resistance (Sened 1991, 398). If the EP wants to re-negotiate a formal institutional rule to its advantage during application, it therefore needs to employ bargaining strategies which build on its longer time horizon and its pre-existing institutional rights (see above). In the following, we focus on two such strategies which are very frequently employed to that purpose: delaying and arena-linking.
First, the EPâs greater time horizon and insensitivity to failure as compared to the Council Presidency and member state governments (Farrell and HĂ©ritier 2003, 582) as well as its new co-decision rights in economic governance obtained by the Lisbon Treaty (see below) allow the EP to delay the decision-making process (see Gino and Moore 2008, 374). Member state governments, in their sum, are constantly exposed to votersâ critique in elections; votersâ responses to European policies almost exclusively target national governments, and if discontent, they put the blame at their governmentsâ feet, possibly voting them out of office.
Moreover, the relatively high turnover in the Council has a negative impact on its bargaining power in inter-institutional negotiations. In particular, high turnover âcounteracts the accrual of experience, produces less institutional and procedural knowledge, provides fewer opportunities for contact among incumbents, and weakens networks of internal and external communicationâ (Scherpereel and Perez 2015, 666). Thus, using the DEUII data set, Scherpereel and Perez (2015) confirmed that high levels of turnover in the Council clearly hurt its bargaining success vis-Ă -vis EP and Commission.
By contrast, members of the EP (MEPs) are exposed to electoral âjudgmentâ only every five years (and even then voter turn-out is low). This relative personnel constancy allows the EP to be more âpatientâ and possibly refuse to agree to certain legislation until its institutional demands are accommodated. In this way, the EP can seek to reap further powers in inter-institutional negotiations. We thus conjecture that
if the EP has the formal right to block a decision, is more patient than the member states, and uses a delaying strategy, it obtains an informal institutional change to its benefit.
Second, especially when the EP lacks the necessary competences to block a decision, it may establish an informal link to another decision-making arena. In this way the EP can withhold its support for a decision in an arena where it has full competences until it obtains more informal institutional powers in the arena with no competences. By making the outcome in one arena dependent on the outcome of another arena, the EP may thus take the decision-making process hostage (Farrell and HĂ©ritier 2007, 292).2 We therefore submit that
if the EP, using a formal veto in one arena X, creates a leverage in another linked arena Y in which it has no formal vote, it obtains an informal institutional change in its favour in arena Y.
