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Abstract
The functioning of the external economic governance of the European Union (EU) hinges on the functioning of the internal economic governance structure to ensure cohesion between the EU’s external voice and its internal actions. Consequently the debate has focused almost in its entirety on the internal aspect of economic governance reform. This article, swimming against this current of economic governance analyses, examines the EU’s external economic governance in the G20 during the Great Recession using a principal–agent framework. More specifically, it argues that although the terms of delegation in the G20 are incomplete and open to the agents’ interpretation, two important sources of agency control limit the discretion of the EU delegation. The system of multiple agents with its inherent inter-institutional rivalry and the presence of the G20/EU members ultimately increase the control of the collective principal at the cost of presenting a unified EU position. At the same time the current design of the EU’s external economic governance has fuelled tensions between the EU and underrepresented developing countries. Along similar lines, looking at the possibilities of interest representation, the terms of delegation, with an unequal collective principal, are biased towards large and powerful EU/G20 member states. On the basis of probit analyses it is argued that these states are likely to oppose the increased delegation that would enable the establishment of an external economic governance.
Acknowledgements
I gratefully acknowledge financial support by the German National Merit Foundation as well as the MERCURY Project through the EU’s Framework VII programme. Thanks are due to all interviewees who generously gave me their time, allowing me to benefit from their insight and first-hand experience. I am grateful to Mark Aspinwall, David Howarth, and John Peterson for their perceptive comments on an earlier draft of this article. I also wish to thank all participants of the College of Europe Conference on economic governance in Bruges on 1 March 2011 for their helpful comments, in particular Michelle Chang. The usual disclaimer applies.
Notes
1. The G20 consists of 19 countries — Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, the Russian Federation, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States — and the EU.
2. Although the Council is usually qualified as being closer to the preferences of the member states and easier to control by its principals, an EU representation by the President of the Council still entails considerable delegation of a previously national prerogative.
3. While this might hold true in the context of numerous policy fields, it is difficult to see how any of the EU’s organs has more expertise in economic governance than many of its member states. One Commission official echoed this caveat suggesting that ‘as things are currently, the entire Commission is stretched to its utmost limits. If we have two guys working on any given issue you can be sure that bigger member states, such as Germany, have 20’ (author interview, 3 March 2011). The same is arguably true for the Council. However whereas delegation in the context of the G20 and fiscal policy coordination may not be propelled by the wish to benefit from the policy content expertise of the supranational agent, the considerable summitry expertise of EU officials was perceived to have advanced the G20 considerably (Rommerskirchen Citation2011)
4. The most striking exception is monetary policy for EMU member states.
5. Author interview 24 March 2011, see also Chaffin (Citation2009).
6. Ibid.
7. Author interview, 22 May 2011.
8. Author interview 23 May 2011.
9. Spain has secured a standing invitation to G20 summits giving it a de facto permanent EU seat.
10. Author interview, 24 March 2011.
11. Author interview, 24 May 2011.
12. Ibid.
13. Nielson and Tierney (Citation2003) discuss how diverging preferences among the principals may lead to a less strict mandate for the agent.
14. Author interview, 25 May 2011, see also Giovannini et al. (2012, 54).
15. Spain and the Netherlands (the latter was to hold the rotating EU Council presidency) had argued that it should be invited due to the size of its economy and participated as part of the French and the EU delegation respectively.
16. Author interview, 24 May 2011, see also Angeloni and Pisani-Ferry (2012).
17. Author interview, 12 April 2011.
18. One interviewee described the reaction of the Chinese delegation to the decision to loan money to Portugal ‘the Chinese were furious. No one had told them in advance and they were under the impression that the Europeans considered the IMF to be their institution which they could use in any way they wanted’ (25 May 2011).
19. Author interview, 24 May 2011, see also El-Erian (Citation2012).
20. For an evaluation of the performance of the G20 in facilitating macroeconomic policy coordination see for example Angeloni and Pisani-Ferry (2012).
21. Probit models are non-linear regression models designed to estimate relationships involving dependent variables that are binary in nature.
22. The presence of an endogenous explanatory variable which is determined by the equations in the system.
23. Correlation coefficients not reported to conserve space, but can be obtained from the author upon request.