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ABSTRACT. The euro crisis made visible the omitted stage in the European integration process. The EU jumped from the common market straight to the monetary union, neglecting the formation of the economic union. The new EU economic governance is a combination of a vertical shift of competences, i.e. from one level of government to another level, and a horizontal shift of powers and competences, i.e. from elected governments to unelected government bodies entrusted with (parts of) government policies, from discretionary policy towards rules. The purpose of this paper is to analyze the new EU economic governance within the conceptual framework of these vertical and horizontal shifts. This two-dimensional approach offers a better analytical tool than the more traditional one-dimensional fiscal federalism approach. In the first part of the paper the focus is on the policy domains that are the objects in the shifting process. Budgetary policy mainly is at stake, but also banking regulation and monetary policy are partly involved. The second part of the paper deals with the relevant aspects of the theories on the division of powers along vertical and horizontal lines. The fiscal federalism approach to vertical separation and the time consistency theory on the horizontal distribution of power are briefly exposed. In the third part the relevant aspects of the new EU economic governance of the European semester, six-pack, two-pack and fiscal compact are presented and put into our framework of vertical and horizontal power shifts. pp. 77–100
JEL codes: E58; H77; L38

Keywords: fiscal federalism; discretion; rules; economic governance

How to cite: Naert, Frank (2014), “The New EU Economic Governance: Vertical and Horizontal Power Shifts,” Journal of Self-Governance and Management Economics 2(4): 77–100.

FRANK NAERT
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Ghent University, Belgium

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