Still a regulatory state? The European Union and the financial crisis

The European Union (EU) has been conceptualized as a regulatory state, i.e., an emerging polity that differs from the classic Westphalian state. Unable to engage in redistribution and stabilization, the EU has specialized in a range of regulatory functions related to market creation and management of externalities. We argue that the European financial crisis is pushing the EU to move beyond regulation. We explore the origins of and responses to the crisis, and examine the ways in which the crisis is creating pressures for stabilization and fiscal policy. Indeed, we argue that significant inroads into these areas have already been made and further changes in the direction of stabilization and fiscal policy are likely, though whether such competences are centralized or decentralized is an open question.