European Financial Governance: FTT Reform, Controversies and Governments’ Responsiveness

Abstract

The Eurozone crisis exposed the incompleteness of the Economic and Monetary Union’s governance framework thereby prompting the promotion of a multitude of reform packages and proposals. This simultaneously induced conflict among EU governments on both design and content of such reforms. In case of the financial transaction tax (FTT) proposal, which failed to garner consensus among member governments, it illustrates Ireland’s disapproval clashing with favorable German and French stances. While these governments aligned on the necessity to reform, the process of harmonizing EU financial governance proved rather difficult. In analyzing governments’ variation of reform support or opposition, the societal approach to governmental preference formation is employed. This is considerably conducive in directing academic attention to the role of two explanatory variables, domestic material interests and value-based ideas, in shaping governments’ reform positions. This article encompasses a comprehensive comparative account of domestic preference formation and responsiveness of three EU governments (France, Germany and Ireland), in the case study of the FTT, and demonstrates that the two societal dynamics are prone to have played a role in shaping financial reform controversies. By building on and contributing to Eurozone crisis literature, this approach seems appropriate in analyzing financial governance reform due to the crisis’ domestic impact resulting in increased public salience, issue politicization and an advanced role of elected politicians.