Understanding fiscal policy change in times of crisis: conditionality from the euro crisis to the COVID-19 pandemic

This paper deals with policy change in an area of core state powers like fiscal integration. It aims at understanding how and why conditionality in EU fiscal policy changed from the euro crisis to the COVID-19 pandemic. Firstly, it explores the functioning and rationale of conditionality based on the measures adopted to tackle the Eurozone sovereign debt crisis. To do so, the paper operationalizes conditionality highlighting its goals, the tools to regulate it and the settings of those tools. Secondly, the paper analyses the EU’s reaction to the COVID-19 pandemic. How has conditionality been enshrined into Next Generation EU? How has conditionality changed compared to the EU’s management of the euro crisis? Through an in-depth case study analysis, the paper sheds light on explanatory factors accounting for the evolution of conditionality between the two crises. Conditionality is a crucial component of the EU’s fiscal policy because it is about the way in which the EU can spend money and/or transfer it to member states (MS). As such, it is a topic of high political salience that affects the core of EU fiscal integration which – due to the no-bailout clause – does not foresee any substantial financial transfer from the EU to MS or within MS. Crises are critical junctures where integration can (or cannot) deepen. Conditionality is thus a key element to understand the impact that certain anti-crisis measures can have on EU fiscal integration.