Preventing the eurozone budget: issue replacement and small state influence in EMU

Abstract

When the two most powerful EU member states, Germany and France, proposed a genuine budget for the eurozone, the odds were in favour of a new stabilization instrument. However, no such eurozone budget materialized. Instead, member states agreed on the ‘Budgetary Instrument for Convergence and Competitiveness’ (BICC), a reform delivery tool that lacked the risk-sharing features envisaged by France and partly conceded by Germany. How can we explain the failure of a eurozone budget to emerge? By introducing the concept of ‘issue replacement’, this article traces how the Netherlands, supported by a small counter-coalition, replaced the eurozone budget proposal with the BICC. The article shows that replacing an issue on the agenda while keeping the original label is an effective strategy for less powerful actors to prevent unwelcome issues from materializing. With regard to EMU politics, the results indicate that smaller ‘creditor states’ can block a Franco-German initiative.