A historical institutionalist explanation of the EU's responses to the euro area financial crisis
How can we understand the European Union's responses to the euro area financial crisis? This contribution examines this question through a historical institutionalist (HI) lens. First it reviews the design of existing institutions. With the help of HI it examines what challenges the institutional design posed on the European Union (EU) when the crisis hit. Next, the responses to the crisis by member state leaders and by EU-level actors are reviewed. An analysis is made of selected new EU institutions created to address the crisis: the European Financial Stability Facility; the European Stability Mechanism; the Six-Pack and Two-Pack; the European Semester; and the Fiscal Compact. Four ideal types – ‘displacement’, ‘layering’, ‘drift’ and ‘conversion’ – are examined and found not to fit well. In some cases institutions were ‘layered’ on top of existing institutions. Perhaps an amendment could be made by offering the ideal type ‘copying’ in those cases where new institutions that borrow from earlier institutions. Although no complex problem can be truly understood by looking at it through one single theoretical lens, this contribution argues that a large of part of the problems that emerged, and the solutions adopted, can be understood by examining it through an HI lens.