Abstract
Over the past two decades, the European Union has become a central actor in financial regulation and has developed complex institutions to govern financial markets. Recent scholarship has detailed the functioning of these institutions and revealed their inner dynamics. At the same time, the political economy embeddedness of financial regulation, which had inspired early research on European financial integration, has increasingly dropped out of the picture. This article makes the case for making this embeddedness central once again and exploring how the Europeanization of financial regulation has affected the political economy make-up of Europe. To do so, scholars need to study finance not only as a service sector, but also as that facet of the economy that creates and allocates credit and financial investments. Beyond the evolution of socio-economic orders inside Europe, a focus on such links provides novel avenues for making sense of the European role in global financial governance.
ACKNOWLEDGEMENTS
The author gratefully acknowledges research assistance by Bart Stellinga, support from the GR:EEN FP7 project (# 266809) and the Harvard University Center for European Studies.
Notes
To aid legibility, I use ‘financial crisis’ through this article to denote of financial malaise of the past years, even if the strength of the causal links between the subprime, banking and sovereign debt crises is still an open question.
Unless specified otherwise, EU financial integration refers both to the cross-border integration of European financial markets (for a range of relevant indicators, see, for example, European Commission [2007] and subsequent versions of the Financial Integration Reports) and to the concomitant supranationalization of financial governance in the EU. Financial regulation refers to formal rules applicable to both retail and wholesale financial transactions.
The ‘varieties of capitalism'label will be used because it is the most established and least unwieldy concept to highlight institutional complementarities.
In contrast to wholesale activity, retail banking and insurance remained fragmented along national lines, much to the chagrin of the Commission (Grossman and Leblond Citation2011).
The obvious example here is the eurozone crisis and the importance of cross-border integration of financial firms for the emergence of imbalances and for the difficulty to solve the crisis. While available evidence suggests clear links, these are as yet poorly understood and documented.