Eurozone Governance Research Articles

Indicative Planning and France's Backstage Contribution to Eurozone Governance

AbstractThis article examines the history of indicative planning in France to challenge conceptions of Eurozone governance. French planning is seen as a road not taken in Europe. Instead, the Eurozone is conceptualised through planning's antagonist – German ordoliberalism. Key features of this are rules‐based austerity and price stability pursued by an independent central bank. Scholars have, however, recognised that Eurozone governance exceeds ordoliberalism through a logic of integration oriented towards coordination rather than convergence and a governance rationality of performance management rather than legal enforcement. I analyse the historiography of indicative planning to argue that it provides a useful conceptual vantage point to understand these features of Eurozone governance. Highlighting the legacy of planning provides an alternative perspective on Eurozone politics. It shifts attention from the German‐led legal constraints imposed on national governments to how techniques of planning have suited French state desires for international coordination without supranational domination.

Deciding upon the Banking Union: How a joint belief shift instigated deep institutional change in Eurozone governance

AbstractThis paper explores how a joint belief shift among policy actors in the Eurozone crisis led to a deep institutional change in Eurozone governance: the banking union. Based on Rinscheid's framework of institutional change, we apply discourse network analysis (DNA) of actor statements in European newsmedia to show how banking union ideas emerged and gained ground between 2000 and 2012. We complement the DNA with analysis of secondary sources to provide explanations of how the rise and dissemination of banking union ideas came about. Our findings show that potential junctures in a crisis provide opportunities for policy actors to exploit and instigate a joint belief shift, but only if certain critical antecedents allow for this. Our study complements EU policy analysis studies by offering a fine‐grained theory and methodology to assess and understand the role of (coalitions of) key policy actors and their ideas in processes of EU institutional change.

Scrutiny or Complacency? Banking Union in the Bundestag and the Assemblée Nationale

The financial and eurozone crises highlighted the inadequacy of the original governance structures of the eurozone. In response, a range of reforms were launched, including the creation of a European banking union. In practice, some elements of the banking union were delayed by division among member states and the breakdown of the Franco-German motor, such as the question of the operationalization of the single resolution mechanism and fund or the deposit insurance scheme. In addition, eurozone governance—which would once have been regarded as a technocratic issue—became increasingly politicized. The aim of this article is to study the extent to which the banking union was scrutinized by parliament and to what degree this reflects material interests and ideas. For this purpose, it focuses on salience (i.e., how much attention the issue received) and polarization (i.e., the divergence of positions). The analysis of the resolutions and debates of the German Bundestag and French Assemblée Nationale, i.e., the parliaments of two key states in EU decision-making on banking union, finds that the German government was indeed closely scrutinized, whereas the French government was relatively unconstrained.

Reforming the Institutions of Eurozone Governance

The Eurozone has faced repeated crises and has experienced profound transformations in the past years. This thematic issue seeks to address the questions arising from the changing governance structure of the Eurozone. First, how have the negotiations, pressures of the crises and reforms impacted the relationships between key actors like EU institutions and Member States? Second, where did national positions come from and what role did domestic politics play in the negotiations? And finally, to what extent has the evolution of Eurozone governance left room for adequate control mechanisms and democratic debate? The articles in this issue highlight the developing role of Member States, domestic politics and democratic and legal control mechanisms.

The management of the Eurozone in crisis times: Actors, institutions and the case of bailout packages

The adjustment to the financial crisis was particularly brutal for Eurozone countries targeted by private bondholders. Financial assistance through the newly created Eurozone governance system was conditional on the implementation of austerity measures and the introduction of structural reforms in industrial relations (decentralization of collective bargaining and liberalization of employment protection). Our analysis focuses on the formation process and the structural features of Eurozone supranational institutions. Building from the insights of actor-centred institutionalism, we illustrate the importance of coalitions among some, but not all, important actors based on the overlapping of their non-monolithic preferences in the process of institutional innovation. The structural features of Eurozone institutions curtailed member states’ ability to effectively resist the imposition of internal devaluation policies. A contested outcome, these institutional features were secured by a specific coalition of important actors – most notably, the German government and the European Central Bank – based on their overlapping interests around internal devaluation policies.

ON SOCIAL EUROPE AFTER COVID-19; pp. 173–190

Europe, the old world, was the epicentre of Covid-19 after its initial emergence and incubation in China. Having resulted in vast human misery, the pandemic raises necessary questions about the future direction of Europe - what kind of Europe will emerge from the devastation - and, moreover, will the eruption of the European societies be used as an opportunity for changing, i.e. recalibrating Europe? The overarching concern of this article is social Europe, i.e. Europe with a commitment to 'good society', conducive to human wellbeing. The article analyses the response to the virus in Europe and by the European Union. It contextualizes the response within the framework laid by the Maastricht Treaty of 1992 and the handling of the sovereign debt crisis of 2010. Thereafter, I turn to the 'Manifesto for the Democratization of Europe' by leading French social thinkers from 2018, in order to discuss the reconstruction of the eurozone governance. I envision an alternative role for the European Central Bank: instead of continuing with the unsuccessful Quantitative Easing (QE) strategy, the ECB should use its capacity to pay people of Europe a temporal universal basic income, which could later be made permanent. Both the manifesto and universal basic income stand in tension to the status quo, yet remain firmly on the horizon of the possible - and necessary to restore human well-being to the guiding principles of the European political economy.

The determinants of euro zone development: governments and fragile legitimacy

ABSTRACT Euro zone economic governance is determined by governments, as member states resist ultimate transfers of authority to traditional supranational institutions. Neither crisis-driven institutional change nor later reform initiatives have altered this predominant role of domestic executives. The Commission cannot exercise ultimate decision-making powers in the domain of economic governance unilaterally. Instead it is co-opted to what could be called a collective euro zone executive of member state governments. The latter act by consensus or not at all. The democratic pathologies of European politics imply that governments remain reluctant to vacate their seats in euro zone governance. So far, governments have consistently opted for making collective decisions and have chosen to circumvent domestic actors when the euro was at risk. However, governments shy away from forward-looking reforms, which have redistributive implications and are beyond their future control, as they remain uncertain of their own legitimacy when deciding on the euro’s future.

Accountability in Post‐Crisis Eurozone Governance: The Tricky Case of the European Stability Mechanism

AbstractEstablished at the height of the Eurozone sovereign debt crisis, the intergovernmental European Stability Mechanism (ESM) has, potentially, considerable influence over decisions on the provision of loans to Eurozone member state governments and on the recapitalization of banks. Legally and organizationally, the ESM is an international financial institution and thus its accountability can be compared to that of the International Monetary Fund (IMF) and other international financial institutions. However, the ESM's governance structure and decision‐making procedures show that it is deeply embedded in the Eurozone governance architecture, resulting in a dual institutional embeddedness. Focusing on vertical and horizontal accountability combined with a learning perspective on accountability, this article presents an assessment of the accountability mechanisms applicable to the idiosyncratic ESM and how these mechanisms work in practice.

Monetary integration in the Eurozone and the rise of transnational authoritarian statism

The negotiations over the Eurozone crisis have increasingly come to reflect Poulantzas’ idea of ‘authoritarian statism’, i.e., a decline in the relevance of democratic institutions and a shift in political power towards technical state apparatuses. Yet, scholarly approaches to transnational integration have provided little guidance as to why monetary relations have become such a pronounced point of condensation for the contradictions inherent in European integration. While mainstream theories of monetary unions such as optimal currency area theory neglect the impact of state power and class interests on monetary politics, more critical perspectives on transnational integration have paid insufficient attention to monetary governance and its role in the mediation of international relations. The present paper brings heterodox theories of international relations and monetary integration to bear on the increasingly authoritarian dynamics of Eurozone governance. Reflecting on Bruff’s discussion of authoritarian neoliberalism, we proceed to examine how the circumvention of democratic institutions via Eurozone monetary governance is more precisely captured through the notion of transnational authoritarian statism. We develop this concept in relation to two historical periods of European integration: the formation of the Economic and Monetary Union and the recent extension of the European Central Bank’s scope of monetary governance.

Why and how do think tanks expand their networks in times of crisis? The case of Bruegel and the Centre for European Policy Studies

ABSTRACTThe eurozone crisis has spectacularly increased the European Union’s (EU’s) institutional demand for expert knowledge. While the crisis has challenged the legitimacy of the EU in many ways, it has in contrast amplified the visibility and the role of Brussels-based think tanks as laboratories of ideas that think ahead about eurozone governance and policies. Drawing on the analysis of more than 450 expert reports produced by two leading Brussels-based think tanks, over 300 CVs and biographical notes as well interviews, this article explores when, how and why Brussels-based think tanks expand their networks in times of crisis. While the article leaves aside the question of their ideational impact upon agenda-setting and the policy formulation process leading to the new European economic governance, it shows how think tanks adapt to crises and how they seek to have a voice in thinking about the future of the EU’s economic governance.

Desafios para uma nova governação na Zona Euro

O avolumar de impactos negativos da crise económico-financeira nos países mais frágeis da Zona Euro tem despoletado aceso debate sobre a viabilidade da arquitetura da União Monetária Europeia (UME), cuja imperfeição pode pôr em causa os objetivos últimos do processo de integração europeia. Com efeito, esta crise tem mostrado de forma eloquente que a UME teve lacunas graves no seu desenho e no quadro operacional que a suporta, o que não evitou efeitos penalizadores para alguns Estados-membros e alimentou a exigência de alterações estruturais no paradigma de governação da moeda única. Assim, foram surgindo diferentes iniciativas das instituições comunitárias, ancoradas em posições de autores bastante críticos sobre o processo de integração monetária europeia, e que paulatinamente têm vindo a transformar o modelo de governação da Zona Euro. Neste contexto, este artigo prossegue dois objetivos: por um lado, identificar e discutir a racionalidade e os fundamentos das principais mudanças que têm ocorrido na Zona Euro nos últimos anos; por outro, refletir sobre os dilemas que em variadas ocasiões têm oposto a necessidade de maior legitimidade das decisões de cariz intergovernamental e a eficiência requerida pelo complexo processo de construção europeia. Finalmente, abordaremos as condições políticas e técnicas para uma governação eficaz que permita melhorar a resiliência da Zona Euro no seu todo e aumentar a sua eficácia.

Eurozone Governance in 2016: The Italian Banking Crisis, Fiscal Flexibility and Brexit (Plus Plus Plus)

Eurozone Governance in 2016: The Italian Banking Crisis, Fiscal Flexibility and Brexit (Plus Plus Plus)

Political legitimacy and crisis management in the Economic and Monetary Union: a model of democratic governance

ABSTRACTThe euro and sovereign debt crisis is both a conflict of political and economic interests and a conflict of interpretations. Two narratives struggle for hegemony in the European ideological imaginary. Each calls for a different mode of crisis management, and each represents a different vision of the single currency, European economic and monetary policy, and European integration as a whole. Each presents different theses on the origins and causes of the crisis, as well as its solution. As important as it is to know which narrative provides a correct interpretation of the crisis in macroeconomic and monetary terms, both remain insufficient when it comes to solving the political and ethical conundrum facing Eurozone governance and the management of the sovereign debt crisis. In fact, both paradigms mirror the economic and political interests and legitimate ethical expectations from the standpoint of which their proponents approach European integration. To understand these expectations, it is therefore necessary to enquire into the conditions of fairness that might allow for legitimate crisis management. The paper attempts to do so while also presenting a model of democratic governance for the Economic and Monetary Union.

Eurozone Governance: From the Greek Drama of 2015 to the Five Presidents’ Report

Eurozone Governance: From the Greek Drama of 2015 to the Five Presidents’ Report

Интервью с Дэвидом Вудраффом: «Финансовый рынок правит через панику»

David Woodruff, associate professor of Comparative Politics at the London School of Economics and Political Science, was interviewed at the Volkswagen Summer School “Governance, Markets, and Institutions: Russia and Germany Compared,” which took place at the Free University Berlin, September 26-October 10, 2015. As a guest lecturer, Woodruff gave a presentation, “Eurozone Governance and Global Financial Stability.” The interview was prepared by Elena Gudova, a PhD student and teacher at the Higher School of Economics. David Woodruff explains the origins of his interest in Karl Polanyi’s famous work The Great Transformation and how he applies Polanyi’s ideas to the 1990s economic reforms in Russia and the current crisis in the Eurozone. According to Prof. Woodruff, Polanyi’s work is becoming increasingly important today because it analyzes the foundations of the neoliberal market approach and government attempts to shield markets from political processes. In his book Money Unmade: Barter and the Fate of Russian Capitalism [Woodruff 2000a], Woodruff discusses barter and debt offsets in Russia before the devaluation of 1998 as a defensive reaction of society to attempts to introduce market liberalism of the sort Polanyi analyzed, employing analogous means of mitigating the price mechanism. Another of Polanyi’s ideas that Woodruff highlights is the way the gold standard strengthened the political influence of bankers and financiers by creating the possibility for panic on the financial markets. Woodruff also refers to the term “ordoliberalism” to describe a specific form of liberal policies. Ordoliberalism argues that the state is necessary for market functioning but that its actions must conform to strict and sharply defined rules. The potential inflexibility of these rules, even in the face of market panic, helps to make the prospect of panic an important tool of political influence. In conclusion, Woodruff also notes that the study of ordoliberalism’s history could give us some understanding as to why some countries prosper while others do not, and how different ethical issues overlap with the economic doctrines of distinct states.

Eurozone Governance: Deflation, Grexit 2.0 and the Second Coming of Jean‐Claude Juncker

Eurozone Governance: Deflation, Grexit 2.0 and the Second Coming of Jean‐Claude Juncker

Qualitative easing and risk transfer from corporations to central banks

When economies face deflation and de-growth, Central Banks can only activate unconventional monetary policies. Quantitative easing inflates the Central Bank balance sheet, printing money and adding liquidity to the system while qualitative easing modifies the asset composition. With qualitative easing, Central Banks absorb the risk, flattening the yield curve. Consequences for banks and corporate borrowers may be substantial. Both measures increase inflation and reduce borrowing risk premiums, with an impact on company’s balance sheet, widening economic and financial margins and decreasing the real value of debt. Corporate governance implications concern credit risk pooling, as well as (de)leverage, asset substitution and duration risk. This paper provides unprecedented analysis of the impact of ECB unconventional monetary policy on Euro-zone governance equilibrium

Law, Fiscal Federalism, and Austerity

In response to the Eurozone crisis, European Union leaders have undertaken a number of dramatic reforms, including the imposition of a new regime for fiscal governance of Eurozone Member States. The 2012 Fiscal Compact Treaty, one of the lynchpins of this package of reforms, requires states to incorporate judicially enforceable balanced-budget rules into national law. This article explores this effort to judicialize austerity in the European Union, focusing on two interrelated sets of questions. First, why did EU leaders turn to the courts and ask them to become the stewards of fiscal discipline, and second, should we expect the effort to judicialize fiscal discipline through the Fiscal Compact to work? I argue that after the failure of the Maastricht Eurozone governance regime, Member State governments concluded that the enforcement of fiscal rules must be shielded from political interference and entrenched at the national level, where national courts could assure that EU rules were respected by reluctant governments. Nevertheless, I conclude that these efforts will fail because they are based on a misunderstanding of when and how fiscal rules are actually enforced. The vague character of the balanced budget rules adopted in the Fiscal Compact Treaty along with other background conditions in the structure of the Eurozone mean that the rules are unlikely to be enforced.

Eurozone Governance: Recovery, Reticence and Reform

Eurozone Governance: Recovery, Reticence and Reform

Changes in Eurozone Governance after the Crisis and the Issue of Growth

The Eurozone countries are still seeking a way out of the crisis that has been affecting the European Monetary Union (EMU) since 2010. Sovereign debt crises, difficulties in the banking system and large current account imbalances have characterized the euro crisis, while several countries of the Eurozone have entered a phase of slow and even negative growth. All this has put at risk the sustainability of the EMU, leading to a climate of distrust surrounding the future of the single currency. The crisis of the Eurozone has shown that a sustainable currency union requires more governance because of the higher degree of economic, financial and fiscal spillovers between euro member countries. However, the crisis has led to significant changes in the institutional framework of the EMU and in the economic policies of the Eurozone, highlighting, above all, the role of the ECB. The present contribution analyses these changes in Eurozone governance and discusses whether they are the correct solutions to the crisis; in addition it focuses on the unresolved issue of growth in the peripheral Eurozone countries.