The Power of the Weak? Fiscal Redistribution Negotiations in the EU, Australia, Canada, and Switzerland

Fiscal redistribution negotiations between contributor and recipient EU member states require unanimous agreement, revealing inherent conflict. Although the costs of non-agreement are often high for ‘recipients’ as well as ‘contributors’, their bargaining powers strongly differ. The paper analyzes under what conditions sub-units in fiscally weaker bargaining positions can alter the dynamics and substance of fiscal redistribution negotiations to maximize their gains? A comparative analysis of the EU, Australia, Canada, and Switzerland is used to specify the scope conditions under which weaker sub-units can shift power relations and alter the outcome of fiscal redistribution negotiations. The findings are threefold: ‘recipient’ sub-units can rely on strategies such as discursive reframing to advocate for a larger budget if most sub-units can present the agreement as optimal to their own constituents, and if a crisis symmetrically affects all sub-units. Secondly, fiscally weaker sub-units can effectively enlist third-party actors to aid in negotiations if interests align, and if the institutional framework grants sufficient capabilities for mediation by the third-party. Thirdly, ‘recipient’ sub-units can manipulate the institutional environment of budget negotiations by relying on issue fragmentation, that is, the disentanglement of larger conflict areas into smaller ones, if the side-payments proposed can satisfy trade-offs for sub-units with opposing preferences. The paper concludes by discussing the theoretical implications of these findings for better understanding the dynamics of the ‘joint decision trap’ in fiscal redistribution negotiations.