The Politics of Budget Consolidation in Britain and Germany: the Impact of Blame-Avoidance Opportunities. CES Germany & Europe Working Papers, No. 05.2, 2005

According to parts of the literature, blame avoidance opportunities, i.e. the necessity and applicability of blame avoidance strategies, may differ among countries according to the respective institutional set-ups and between governing parties according to their programmatic orientation. In countries with many veto actors, a strategy of "Institutional Cooperation" among these actors is expected to diffuse blame sufficiently to render other blame avoidance strategies obsolete. In contrast, governments in Westminster democracies should resort to the more unilateral strategies of presentation, policy design and timing. At the same time, parties of the left are expected to have an easier time implementing spending cuts while right parties are less vulnerable when proposing tax increases. Evidence from the politics of budget consolidation in Britain and Germany does not corroborate these hypotheses. Instead, it seems that party competition conditions the effects institutions and the partisan complexion of governments have on the politics of blame avoidance.

The harsh reality of Ukraine's fiscal arithmetic. Bruegel Policy Contribution ISSUE 2015/07, June 2015

Ukraine is struggling with both external aggression and the dramatically poor shape of its economy. The pace of political and institutional change has so far been too slow to prevent the deepening of the fiscal and balance-of-payments crises, while business confidence continues to be undermined. • Unfortunately, the 2015 International Monetary Fund Extended Fund Facility programme repeats many weaknesses of the 2014 IMF Stand-by Arrangement: slow pace of fiscal adjustment especially in the two key areas of energy prices and pension entitlements, lack of a comprehensive structural and institutional reform vision, and insufficient external financing to close the expected balance-of-payments gap and allow Ukraine to return to debt sustainability in the long term. • The reform process in Ukraine must be accelerated and better managed. A frontloaded fiscal adjustment is necessary to stabilise public finances and the balance-of-payments, and to bring inflation down. The international community, especially the European Union, should offer sufficient financial aid backed by strong conditionality, technical assistance and support to Ukraine’s independence and territorial integrity.

The Fate of Greece in a ‘Genuine Economic and Monetary Union’: Lessons from a small island state. CEPS Hi-Level Brief, 19 June 2015 Friday, 19 June 2015

As the Greek debt drama reaches another supposedly decision point, Daniel Gros urges creditors (and indeed all policy-makers) to think about the long term and poses one key question in this CEPS High-Level Brief: What can be gained by keeping Greece inside the euro area at “whatever it takes”? As he points out, the US, with its unified politics and its federal fiscal transfer system, is often taken as a model for the Eurozone, and it is thus instructive to consider the longer-term performance of an area of the US which has for years been kept afloat by massive transfers, and which is now experiencing a public debt crisis. The entity in question is Puerto Rico, which is an integral part of the US in all relevant economic dimensions (currency, economic policy, etc.). The dismal fiscal and economic performance of Puerto Rico carries two lessons: 1) Keeping Greece in the eurozone by increasing implicit subsidies in the form of debt forgiveness might create a low-growth equilibrium with increasing aid dependency. 2) It is wrong to assume that, further integration, including a fiscal and political union, would be sufficient to foster convergence, and prevent further problems of the type the EU is experiencing with Greece.

The Political Economy of Financial Crisis Policy. Bruegel Working Paper 2015/06, July 2015

Highlights • Government intervention to stabilise financial systems in times of banking crises ultimately involves political decisions. This paper sheds light on how certain political variables influence policy choices during banking crises and hence have an impact on fiscal outlays. • We employ cross-country econometric evidence from all crisis episodes in the period 1970-2011 to examine the impact political and party systems have on the fiscal cost of financial sector intervention. • Governments in presidential systems are associated with lower fiscal costs of crisis management because they are less likely to use costly bank guarantees, thus reducing the exposure of the state to significant contingent and direct fiscal liabilities. Consistent with these findings we find further evidence that these governments are less likely to use bank recapitalisation and more likely to impose losses on depositors.

The Political Economy of the 2014-2020 Common Agricultural Policy: An Imperfect Storm. CEPS Paperback, 17 August 2015

After five years of debates, consultations and negotiations, the European institutions reached an agreement in 2013 on the Common Agricultural Policy (CAP) for the 2014-2020 period. The outcome has major implications for the EU’s budget and farmers’ incomes but also for Europe’s environment, its contribution to global climate change and to food security in the EU and in the world. It was decided to spend more than €400 billion during the rest of the decade on the CAP.The official claims are that the new CAP will take better account of society's expectations and lead to far-reaching changes by making subsidies fairer and ‘greener’ and making the CAP more efficient. It is also asserted that the CAP will play a key part in achieving the overall objective of promoting smart, sustainable and inclusive growth. However, there is significant scepticism about these claims and disappointment with the outcome of the decision-making, the first in which the European Parliament was involved under the co-decision procedure. In contrast to earlier reforms where more substantive changes were made to the CAP, the factors that induced the policy discussions in 2008-13 and those that influenced the decision-making did not reinforce each other. On the contrary, they sometimes counteracted one another, yielding an ‘imperfect storm’ as it were, resulting in more status quo and fewer changes. This book discusses the outcome of the decision-making and the factors that influenced the policy choices and decisions. It brings together contributions from leading academics from various disciplines and policy-makers, and key participants in the process from the European Commission and the European Parliament.

What do Eurozone academics think about EMU reform? On broad support and German exceptionalism. Bruges Political Research Papers 41/2015.

This paper is an empirical contribution to the literature on the formation of policy preferences on Economic and Monetary Union (EMU) reform within its Member States. In the aftermath of the euro crisis, many proposals to ‘complete’ EMU have been tabled. However, discord among Member States has led to a piecemeal restructuring of EMU. For this paper, a survey has been conducted among euro area academic experts, gauging preferences on EMU reform. We find that general consensus masks significant discord among academics from different Member States. Our data indicates the existence of conflicting national epistemic communities, bound by shared causal beliefs on macro-economic policy. Academics within the key creditor Member State, Germany, assume an outlier position. Within the sample of German academics, economists are particularly strongly opposed to all moves in the direction of fiscal or social union. As economists are those academic experts most likely to influence the economic policy beliefs dominant among the German policy elite, these results are highly politically salient. We confront these findings with the literature on the exceptionalism of German economics. We contend that our results substantiate the claim that inadequate EMU reform and, more generally, the EU approach to the Eurozone crisis, can be partially explained by the firm grip these economic doctrines hold over the economics profession and policy-making circles in Germany.

Automatic Fiscal Stabiliser: Make it happen! EPC Discussion Paper, 2 May 2016

The eurozone crisis triggered a whole new series of innovations in EU economic governance in order to make the Union more resilient for the next economic downswing. But one of the more persistent issues are the socio-economic divergences between member states, identified by the Five Presidents’ Report as a major problem in the functioning of the Economic and Monetary Union (EMU). Debates took place in recent years about automatic stabilisers, and more specifically about the possibility of introducing an unemployment insurance within the EMU. While the need for some form of fiscal risk-sharing has become a dominant view in expert circles, there has been much less progress among the main political parties and stakeholders. In this study, Regula Hess and László Andor analyse the political feasibility of the adoption of an automatic fiscal stabiliser (AFS) for the eurozone by evaluating actors’ positions towards three distinctive proposals: 1) cyclical shock insurance, 2) reinsurance, 3) a European basic unemployment insurance; they included an empirical case study of France and Germany as the most relevant players within the intergovernmental bargaining constellation. Although the authors realise the current political context makes the adoption of an AFS improbable, Hess and Andor encourage stakeholders to further pursue the discussion, as windows of opportunities can open at any time, and even give some suggestions on what the parameters of the most feasible proposal might be.

Competitive Representative Claimsmaking: Party Politicians and Institutional Factors in the Case of EU Budget Negotiations

This study provides an empirical comparative case study of representative claims-making in EU budget negotiations. Two questions are addressed in this paper. First, the paper asks what the role of elected or appointed partisan politicians is in comparison to other representatives. This question is relevant given the reported increasing importance of non-elected representatives. Secondly, the paper asks what the influence of institutional factors is on the practice of representative claims-making. As representative claims-making unfolds in the public sphere, the institutional factors of the public sphere may affect both the claimants it provides a platform for as well as constituencies represented. The paper finds that politicians continue to perform a crucial role in representation, both with regards to their prominence in the public sphere and with regards to the plurality of constituencies represented in their claims. Although institutional factors clearly affect claimants, there are much less pronounced – though noticeable – differences in the constituencies represented in different public spheres. The overall picture is one of a highly plural representative space in which multiple claimants compete with each other to get their message across. In doing so, claimants address the interests of multiple constituencies. It may well be the inherent competition among claimants, fostered by institutional factors, that ensures the plurality of the EU representative space.