Revenge of the State or Functionalism Fulfilled? What Can the European Financial Crisis Tell Us about the Great Debates?

The financial crisis remains at the center of the process of European integration.  Economists have analyzed the crisis from a number of theoretical standpoints, including fiscal federalism, optimal currency area theory, and economic theories of institutions.  There has been surprisingly little attention to the crisis from the standpoint of political science theories of integration.  In this paper, I consider what the crisis can tell us about two of the most prominent political science theories: neo-functionalism and liberal intergovernmentalism.  Because these two theories are broad and not well specified, I narrow the empirical focus to one important issue—whether the crisis and responses to the crisis follow an endogenous or exogenous logic.  In short, does the crisis seem to develop out of prior economic and political conditions (following a logic of spillover and historical institutionalism) or can it be better characterized as a series of state-directed responses to exogenous forces?  Neo-functionalism is endogenous in its insistence on a self-expanding sectoral logic and in the evolutionary and path dependent development of its political institutions. I focus on the former in this paper.