Altered Europeanisation of Pension Reform in the Context of the Great Recession: Denmark and Italy Compared

This article analyses the Europeanisation of national pension systems in Denmark and Italy. Through the analytical framework of a ‘two-level’ game, it analyses pension reforms in the two countries, which, in the wake of the crisis, breached EU budgetary requirements, and shortly after reformed their pension systems. The EU affects pension reform in both cases, but in distinct ways. When Denmark’s economy was financially vulnerable, the EU’s excessive deficit procedure affected the decision to reform pensions indirectly, by triggering a rapid political decision to speed up a pension reform. By contrast, the Italian economy’s critical vulnerability and the consequent risk for the whole Eurozone led to a situation whereby the European actors entered the domestic political scene and thereafter more forcefully induced reforms. The findings from the two cases show that the EU’s role in pension reform has been significant during crises, but through interaction with domestic actors. Furthermore, from a theoretical perspective, the intervening variables – domestic and EMU vulnerability as well as EU and domestic politics – are crucial to understanding the reform decisions through two-level games.     

The politics of international redistribution: Explaining public support for fiscal transfers in the EU

As a consequence of the Eurozone crisis and the creation of the European Stability Mechanism (ESM), the prospect of a transfer union has become a particularly contested aspect of European integration. How should one understand the public backlash against fiscal transfers? And, what explains voter preferences for international transfers more generally? Using data from the 2014 European Elections Study (EES), this article describes the first cross-national analysis of voters’ preferences on international transfers. The analysis reveals a strong association between voters’ non-economic cultural orientations (i.e., their cosmopolitanism) and their position on transfers. At the same time, it is found that voters’ economic left-right orientations are crucial for a fuller understanding of the public conflict over transfers. This counters previous research that finds economic left-right orientations to be of little explanatory value. This study demonstrates that the association between economic left-right orientations and preferences for international transfers is conditional on a person's social class. Among citizens in a high-income class an economically left-leaning position is associated with support for transfers, whereas it is associated with opposition to transfers among citizens in a low-income class.     

Fiscal institutions, fiscal policy and sovereign risk premia in EMU

We investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest rate spreads of Eurozone countries. Deficits significantly increase risk premia measured by relative swap spreads. The effect of deficits is significantly lower under EMU. This effect partly results from neglecting the role of fiscal institutions. After controlling for institutional changes, fiscal policy remains a significant determinant of risk premia in EMU. Better institutions are connected with lower risk premia. Furthermore deficits matter less for risk premia in countries with better institutions. Markets acknowledge that better institutions reduce fiscal difficulties rendering the monitoring of annual developments less important.     

‘Whatever it takes’: Polanyian perspectives on the eurozone crisis and the gold standard

Abstract

The parallels between the monetary politics of the gold standard and that of the eurozone crisis are striking and have informed contemporary debate about the future of European integration. The eurozone crisis has been widely interpreted as the result of a mismatch between international monetary integration and a concomitant lack of fiscal integration, or more broadly as the result of a European Union which is economically integrated, yet politically fragmented. The prospect of a 1930s-style descent into division and nationalism has formed the backdrop against which moves towards extensive integration at the supranational level have been made. Polanyi diagnosed the political effects of monetary integration through his analysis of the gold standard system in The great transformation, making it important that we unpack his analysis and consider carefully how a Polanyian perspective might apply to the eurozone today. I argue that Polanyi encourages us to look beyond ‘monetary vs. fiscal’ and ‘economic vs. political’ characterizations of European integration, and instead to examine how such oppositions are formed in the first place and how they constrain political debate, particularly in terms of how ‘sound money’ is established as the highest policy concern. Through a re-reading of Polanyi's distinction between ‘all-purpose’ and ‘special-purpose’ money, I highlight how, despite the huge efforts undertaken to preserve the identity of the euro as an all-purpose currency, the eurozone crisis has rendered visible a series of latent conflicts between the different functions of money. This analysis moves us away from the ‘monetary vs. fiscal’ integration view of the eurozone crisis and towards a more open study of how the various possible purposes of money are being articulated and challenged, offering some limited hope for alternatives to the current eurozone policy agenda.     

The euro for China: too important to fail and too difficult to rescue

Abstract

The aim of this paper is to analyze China's strategy in relation to the euro. The first section summarizes China's active support to the single currency since its creation up to the first phase of the current Eurozone debt crisis. It shows how China has used a two-pronged approach. It has developed a public campaign in favor of the euro, especially when the market sentiment has been bearish on the single currency, and it has continued to be an active player in the European sovereign debt markets. The second part explains why China has been so supportive. Beijing wants to move away from dollar hegemony and thus it favors a tripolar monetary system based on the US dollar, the euro and the Chinese renminbi (RMB). With this aim, and despite the crisis, China has continued to diversify its foreign reserves into the euro making it by now ‘too important to fail’, not only because China holds roughly $1 trillion in euro-denominated assets, but also because for China the Eurozone is a crucial market and an important strategic counterweight to US dominance in world affairs. Finally, the third part focuses on how by the end of 2011 China switches to a more cautious approach due to the difficulty involved in rescuing the Eurozone. Domestic pressures, public outcry in Europe against being saved by China, the unwillingness of the European leaders to enter into strategic bargaining and Germany's strategy to use sovereign bond spreads as a market mechanism to create ‘more Europe’ have convinced policy-makers in Beijing to keep a lower profile while making sure the value of the euro remains stable.     

The politics of corporate crises in West Germany

This article examines the experience of corporate crisis in the major industrial economy of Western Europe. West Germany's experience of corporate crisis is analysed by reference to its legal framework, political context and economic history. Particular attention is given to two modes of crisis management: ‘bank‐led’ rescue and ‘the crisis cartel’. Case studies include AEG, Grundig, the steel corporations of the Ruhr and the Saar, shipbuilding corporations and Krupp. The argument draws on the evidence of mounting problems of corporate crisis management to assess the prospects for the theory and practice of the social market economy in West Germany.     

The European Commission and fiscal governance reform: a strategic actor?

The intensification of the financial and economic crisis in Europe has added a new impetus to the debate over the possibilities for securing supranational fiscal integration within the Economic and Monetary Union (EMU). Since the literature on the European Union’s response to the crisis is dominated by the study of intergovernmental politics, this article considers the previously neglected role of the Commission. A framing analysis of the Commission’s crisis discourse is operationalised here, which is supplemented by interviews with senior officials located in the Directorate General for Economic and Financial Affairs (DG ECFIN) during key phases of the crisis. It is found that a supranational reform agenda was never internalised by the Commission. Instead, the Commission acted strategically by framing the crisis around intergovernmental fiscal discipline. These findings suggest that, in line with the ‘new intergovernmentalist’ thesis, supranational institutions themselves may not be as ‘hard-wired’ towards supranationalism as is often assumed.     

The judicialisation of EMU politics: Resistance to the EU's new economic governance mechanisms at the domestic level

Courts are increasingly asked to deal with fundamental political disagreements in liberal democracies. Because of its political salience and the extent of its consequences, the crisis of the Economic and Monetary Union (EMU) has exposed such fundamental disagreements between and within its member states, which numerous plaintiffs have brought before domestic courts and the Court of Justice of the European Union (CJEU). This article analyses this judicialisation of the EMU crisis. Using a database on lawsuits introduced in all 28 member states with regard to crisis measures and the new EMU governance mechanisms introduced since 2010, the authors study which actors use the courts and under which circumstances. Based on a combination of judicialisation and political economy approaches, the article develops a series of assumptions on actors’ motivations in order to understand the reasons for judicialisation in debtor and creditor countries.     

The British Labour Party and monetary union

The real test of the British Labour Party's new orientation to Europe will be its policy on economic and monetary union (EMU). This article analyses Labours political economy in relation to European integration and to the management of the currency, and how the intersection of these two have produced four distinctive approaches to EMU within the party. It assesses the stance of new Labour towards EMU in the context of this internal Labour Party debate as well as in the wider context of European social democracy.     

The Eurozone as a Flawed Currency Area

The European single currency system has come under unprecedented strain during the past three years and there is little reason to assume that this will diminish, in any significant way, in the near future. This article briefly explores the background to the current eurozone crisis before outlining a number of potential solutions. Specifically, we discuss how the credit crunch induced recession of 2008 triggered the problems within the eurozone regarding sovereign debt, looking at the issues of spill‐over and free‐rider effects, together with the implementation of EMU fiscal rules. The analysis is then extended by outlining a series of potential remedies. This consists of a critical evaluation of solutions that the EU has already instigated (i.e. moral persuasion, financial relief measures and debt default), together with a series of alternative propositions (i.e. fiscal federalism and a European Clearing Union) and even the collapse of the euro.     

Lack of European Identity and the Failure of the Eurozone

Since late 2007, the Eurozone has been embroiled in a crisis that has seen GDP per capita stagnate, public debt soar, and unemployment reach record levels. This article argues that the Eurozone crisis will inevitably force fundamental changes in the structure of the EU. The only way to make the Eurozone work is through deeper fiscal integration of Eurozone economies. Yet wholesale fiscal integration cannot be achieved in the near term, due to the fact that EU citizens continue to identify more with their own nationalities than with Europe as a whole. The Eurozone economies of southern Europe will, therefore, continue to flounder, leading to further anti‐EU sentiment. Anti‐EU sentiment may eventually increase up to the point where one or all of these countries leave the Eurozone or the EU altogether. These propositions are supported with arguments from economic theory, and are bolstered by evidence from surveys and opinion polls.     

Recasting German federalism? The politics of fiscal decentralization in post-unification Germany

Why did the ideas of fiscal decentralization gain such political currency in Germany in the late 1990s but meet such a relatively dismal political fate by the Summer of 2001? In answering this question, I propose a framework centered around the interaction of ideas and state institutions to study the politics of fiscal decentralization in advanced democratic nation-states. First, I show that the new set of politically-charged ideas of fiscal decentralization which gained political weight in Germany in the late 1990s were driven by economic problems associated with German unification, the increasing popularity of “fiscal federalism” in German policy circles, and a centerperiphery conflict within German political parties. Second, my analysis explains the political failure of these ideas despite their apparent popularity among political and policy elites. Here, I focus on the role of the upper house of the German parliament in order to explain why these ideas have had such little policy success. After demonstrating that the long-standing tradition of “cooperative” federalism has largely survived German unification, the paper concludes by discussing the potential impact of the European Union’s 1997 Growth and Stability Pact on German federalism.     

Lessons from the malfunctioning of the Eurozone's financial system

The persisting Eurozone's crisis is a combination of a sovereign debt crisis and a banking crisis that have been triggered by the Global Financial Crisis. The sovereign debt crisis is the consequence of a policy laxity for applying the principles and fiscal rules of the monetary union, which led to macroeconomic imbalances and enforced the mispricing of risks by the markets that in turn contributed to escalate the banking crisis. To address the consequences of the Eurozone's crisis, the European Union has implemented a new crisis management framework, which, however, is not immune to trials. The present paper follows a tripartite structure and begins by examining the causes of the Eurozone's crisis and draws its lessons. Second, it examines the reforms of the new crisis management framework and highlights their key challenges. Third, in light of these lessons and challenges, a return to three ‘fundamentals’ is advocated and the case of enhancing the position of the European Union within the area of international financial regulation is built to highlight how this is an optimal policy area for addressing the endemic weaknesses of the Eurozone and how this can contribute to securing a sustainable growth. Copyright © 2014 John Wiley & Sons, Ltd.     

Framing PIGS: patterns of racism and neocolonialism in the Euro crisis

Van Vossole's article explores the racist framing of the peripheral member states of the European Union, the PIGS (Portugal, Ireland (and/or Italy), Greece and Spain). It demonstrates a strong connection between the processes of racialization and depoliticization, as well as the return of colonial dynamics in the Eurozone. Side-stepping political economy and history, the culturalization of politics perfectly complements the ‘post-political’ neoliberal hegemony. Political and media discourses reproduce it in both populist and corporate interests. The culturalization of politics reduces the differences between centre and periphery to certain ‘cultural characteristics and habits’, as reflected in stereotypes of laziness, non-productivity, corruption, wasteful spending and lying. These make it possible to blame the PIGS for the current crisis, legitimizing drastic austerity measures and a loss of sovereignty. The loss of sovereignty shows remarkable similarities with what Kwame Nkrumah defined as neocolonialism: the continuation of colonial power relations through processes of economic dependence, conditional aid and cultural hegemony. While this problematic only resurfaced during the recent Euro crisis, Van Vossole discusses how today's racist discourses and neocolonial politics have their roots in the past, particularly in anti-Irish and anti-Mediterranean racism and in the (semi-)colonial position of the PIGS in the British and Ottoman empires. Besides structural violence against the periphery, a major consequence of this racialization is that it jeopardizes any possibility of further democratic political integration on the basis of a common European identity.     

European elites and the narrative of the Greek crisis: A discursive institutionalist analysis

This article examines elite European discourses during the Greek financial crisis from its pre-history in September 2008 up to the arrival of the SYRIZA government in January 2015. The article employs the conceptual literature on Discursive Institutionalism (DI) and Historical Institutionalism (HI). Having coded 1,153 unique quotes drawn from a dataset of 15,354 news wires from Reuters, the authors argue that the communicative discourse of 63 senior European (and IMF) officials on the Greek crisis during that period demonstrates significant volatility. Four distinct narrative frames are identified: ‘neglect’, ‘suspicious cooperation’, ‘blame’ and ‘reluctant redemption’, punctuated by three discursive junctures in 2010, 2011 and 2012, which reflect the content of the changing communicative discourse of the Greek crisis. The article's contribution is twofold: empirically, it is the first to provide a systematic analysis of the protagonists’ communication of the Greek crisis; and theoretically, it combines DI and HI in an effort to conceptualise an important part of our understanding of ‘bail-out politics’ throughout the Eurozone crisis.     

How the City of London lost at Brexit: a historical perspective

The nature of the City of London as an offshore financial centre has long made London dependent on the British state providing protection from external political regulation, even as London’s foreign currency business separated its interests from British governments’ economic policy preoccupations. Since the 2008 crash and the onset of the eurozone crisis, London has faced threats to both its autonomy from external regulatory demands and to its offshore business interests at the same time as the long-standing external statecraft of British governments around EU membership has broken down. The Cameron governments’ efforts to protect the City within the European Union under political conditions that were transformed by the eurozone crisis exposed the limits of Britain’s position as a member of the European Union. When David Cameron then tried to resolve the problem of EU membership through a referendum he made it extremely difficult to defend the City’s broader commercial interests in the Single European Market because freedom of movement issues weighed significantly more in British domestic politics than financial services.     

The impact of EU intervention on political parties’ politicisation of Europe following the financial crisis

Abstract

This article examines the effect of the financial crisis and economic intervention by the European Union on political parties’ politicisation of the EU within national elections. Data from the Manifesto Project for elections between 2002 and 2017 in 12 Eurozone countries is used to assess how the crisis and intervention altered the saliency, position and clarity of parties’ EU policies. The analysis shows that the crisis only led to an increase in EU saliency in those states not subjected to intervention whilst intervention is actually associated with a decrease in the saliency of the EU. In terms of increasing Euroscepticism, intervention appears to exhibit a greater effect than the crisis although the results display marked asymmetry between different parties on the left and right. The same is observed to be the case for the level of blurring that parties are engaged in to mask their EU positions. The implications of the findings suggest that economic intervention within the EU has negatively impacted democracy in intervened-in member states by reducing the manoeuvrability of parties to provide voters with clear choices on the direction of European integration.     

The Impact of the Fiscal Crisis on Public Administration Reforms: Comparison of 14 European Countries

Abstract

This study aims to empirically test a widespread assumption that fiscal crises instigate administrative reforms. The empirical analysis relies upon an international comparative study of the responses of 14 European governments to the fiscal crisis of 2008–2013. It is found that fiscal crisis and public administration reforms are not necessarily closely connected. In the majority of cases, the fiscal crisis did not have an instant effect of triggering structural public administration reforms or substantial shifts in existing reform trajectories. The crisis intensified the pressure to reform public administration to some extent, but the European governments’ responses predominantly followed a combination of straightforward cutbacks and incremental change. More substantial reforms were carried out in countries most severely hit by the crisis and/or where administrative reforms were conditioned by international financial assistance.     

The European Union and political behaviour: The shadow of the Great Recession

The symposium aims to analyse the politicisation of the European issue following the onset of the Eurozone crisis, in particular its impact on individual attitudes and voting both at the national and supranational level. By way of an introduction, we address the state of the art on the importance of the Eurozone crisis for EU politicisation, as well as outlining each article and its contribution. While our authors may sometimes focus on different dependent variables, they all speak to the question of whether the Great Recession made a lasting difference, and whether EU politicisation matters. Most articles are longitudinal, and test for changes due to the crisis (Dassonneville, Lewis- Beck and Jabbour; Ruiz-Rufino; Talving and Vasilopoulou; Jurado and Navarrete). But preoccupation with the Great Recession is also present in the articles assessing the political learning that unfolded from it (Ruiz-Rufino), or the ones which investigate whether EU effects can be detected during the post-crisis years (Talving and Vasilopoulou; Lobo and Pannico; Heyne and Lobo). Despite the diversity of approaches, and certain differences in findings, each article contributes to a major debate ongoing in the literature, especially three key debates which have arisen: the crisis’ impact on European party systems, economic voting, and the degree of legitimacy of democratic systems.     

Making Sense of Greek Austerity

The process of approving a Greek drawing on funds provided by the international community is now familiar. There is concern about the prospect of securing an agreement between the International Monetary Fund (IMF), the European Union (EU), the European Central Bank (ECB), and Greece, which satisfies all parties. This paper suggests that all parties to the agreement have interests in an orderly resolution of the Greek crisis that keeps Greece in the Eurozone. Furthermore, it argues that disagreements and delay before eleventh‐hour agreements can best be explained politically. The paper first demonstrates how Greece, the IMF, and the EU each have a clear interest in finding an orderly solution to the Greek crisis that allows it to remain in the Eurozone. It then outlines the incremental nature of the package and its strategic benefit both for the European banking sector, and governments in Greece and the Eurozone more broadly.