From Austerity to Mutual Spending? The Frugal Four and the Fiscal Policy Regime of the EU

Completed 2020. This research was financially supported by the Institute for European Studies.

Project Name:

From Austerity to Mutual Spending? The Frugal Four and the Fiscal Policy Regime of the EU


Dr. Kurt Huebner (Professor of Political Science, Jean Monnet for European Integration and Global Political Economy) (PI)
Research Assistant: Henrik Jacobsen (PhD Student of Political Science)


This project looks at the fiscal implications of the coronacrisis and the political dynamics evolving around the distribution of financial recovery funds in the EU. Twelve years after the global financial crisis and ten years after the start of the eurozone crisis, governments around the world again are in crisis-fighting mode. Covid-19 led to various levels of economic lockdowns, eventually resulting in historical reductions of economic output as well as jumps in unemployment numbers. The OECD (June 2020) stated that the ensuing recession would cause damages as no other recession in the last 100 years. The Spring 2020 Forecast of the European Commission suggested that 2020 will see the most severe EU-wide recession in recent history, which will further widen and deepen the gaps between member states. Governments and central banks, as well as international organizations, quickly started to mobilize enormous financial resources to inject liquidity into economies.

Following a joint political initiative by France and Germany, the Commission of the EU quickly proposed a Recovery Plan that foresaw a volume of overall Euro 750 bn to move member economies on a sustainable growth path. Rather than following the design of rescue packages of the Eurozone crises, France and Germany suggested grant-based programs. These plans immediately met political resistance in some European capitals, which only could be overcome in lengthy negotiations that resulted in a scaled-down version of the initial plan. However, even these scaled-down versions have recently been vetoed by member states such as Hungary and Poland. Why the political opposition in a situation of profound misery? How to interpret the policy changes of the Commission and countries like Germany? And, will the outcome of negotiations avoid a policy turn towards austerity in the next round?

The first part of this ongoing research was presented to the European Studies Community Association Canada in August 2020 as a policy brief. Thanks to the generous support of a grant from the IES, we have the opportunity to revise and extend our ideas from the policy brief into an eventual journal article.

Data and method:

This project uses a mixed-methods approach, drawing upon various sources of evidence ranging from EU-wide fiscal data and econometric analysis to comparative case studies of individual member states.

Research output:

Huebner, K. & Jacobsen, H. (2020). Frugal Four and the Fiscal Policy Regime of the EU. From austerity to mutual spending? Policy Memo for the European Studies Community Association Canada. Available from