From NGEU to REPowerEU: policy steering and budgetary innovation in the EU

Abstract

European Union (EU) budgetary politics are considered a stable domain of EU policymaking. Yet, the creation of the pandemic recovery plan NextGenerationEU (NGEU) marked an important innovation. Then, in the face of Russia’s war against Ukraine and the EU’s energy crisis, member states adopted REPowerEU to accelerate the Union’s ‘green’ transition. Developing a historical institutionalist framework, we theorize the driving forces behind these new budgetary instruments. We see a double-dynamic at work: on the one hand, sudden events or crises, like a pandemic or war, create momentum for institutional and policy innovation. On the other hand, the new instruments build upon, and further stimulate, established patterns of EU budgetary politics. Empirically, we document that the concepts of ‘layering’ and ‘conversion’ capture best the EU’s financial responses to the pandemic and the energy crisis. Together, the EU’s new tools suggest gradual, though decisive, steps towards supranational policy steering through the budget.