Beyond the German obsession: moral hazard and power in European economic governance

Abstract The concept of moral hazard has acquired political power in the European Union (EU); attempts to address it have the effect of limiting public risk sharing and of increasing constraints on behaviour. Yet, despite the potential negative implications of such effects in terms of social welfare and fairness, and that moral hazard is in the realm of uncertainty, the politics of moral hazard’s use in European economic governance has rarely been the subject of scrutiny. When not taken for granted, the political power of moral hazard in the EU is often explained in relation to Germany. This article argues that this explanation is partial and does not reflect the broader usefulness of the concept, a conclusion based on an analysis of the discourse on moral hazard of the European Commission. While contestation of moral hazard is expected from an actor in favour of further risk sharing, this article finds that the Commission used moral hazard to help it achieve greater centralisation of fiscal policies at the EU level. This article contributes to the literature on ideas in politics by focusing on an under-researched yet influential concept and by proposing an original operationalisation of power through, over, and in ideas.