Understanding Literal Compliance in the European Union's Multilevel Fiscal Governance

Abstract

Even if member states formally comply with EU law, the ‘ideal type’ of literal compliance, where EU rules are compliantly transposed without customizing their density or restrictiveness, is both rare and improbable. Why do EU member states engage in literal compliance in the ‘least likely’ case of the EU's Fiscal Compact, where customized transposition is crucial for member states to ‘regain control’ over a core state power? Why do external pressures for uniformity trump or reinforce internal pressures for diversity, or vice versa? We analyze the transposition of six fiscal treaty rules in France, Germany, and Italy (N = 18) using fuzzy-set Qualitative Comparative Analysis. Literal compliance results from high policy fit and the need to signal responsiveness to external pressures from the EU and financial markets. Even though it may appear unlikely, literal compliance with EU fiscal policy does occur when uniformity is both easier and more important than diversity for member states.