The Politics of Bad Options - Why the Eurozone's Problems Have Been So Hard to Resolve [SNSF-funded project "Distributional Conflicts and the Politics of Adjustment in the Eurozone Crisis"]

1990-2018

Worldwide, more detailed analyses for European Economic and Monetary Union member states, especially Austria, Germany, Greece, Ireland, Netherlands and Spain.

The project analyzes how societies’ vulnerabilities to different types of policy responses to the crisis affects their willingness to engage in policies that constribute to a sustainable solution of the euro crisis. The argument builds on the insight that the euro crisis is, at its root, a balance-of-payments crisis and argues that the resulting distributive struggles surrounding the politics of the euro crisis in surplus and deficit countries are distinct but related, and should therefore be analyzed in a unified framework. The vulnerability to internal reforms is inversely related to the willingness to support (in surplus countries) or demand (in deficit countries) transfer payments to crisis countries. Empirically, the project examined how vulnerability profiles affect domestic crisis politics and policies on two levels of analysis, the interest-group and the national level. It used a mixed-methods research design that combined a quantitative analysis of national vulnerability profiles and crisis politics in a wider set of deficit and surplus countries, interest-group surveys in selected Eurozone surplus and deficit countries and qualitative comparative case studies of the domestic politics of the euro crisis in these countries. The overarching goal of the project was to generate an encompassing picture of the distributional politics of the euro crisis and a better understanding of the constraints under which European policymakers operate in their attempts to solve the crisis.

The project has argued and shown that the trajectory of the Eurozone crisis was shaped by distributive struggles about how the costs of the Eurozone crisis should be divided among countries, and within countries, among different socioeconomic groups. Together with divergent but strongly held ideas about the 'right way' to conduct economic policy and asymmetries in the distribution of power among actors, severe distributive concerns of important actors lie at the root of the difficulties of resolving the Eurozone crisis as well as the difficulties to substantially reform EMU. The project has provided new insights into the politics of the Eurozone crisis by emphasizing three perspectives that have received scant attention in existing research: a comparative perspective on the Eurozone crisis by systematically comparing it to previous financial crises, an analysis of the whole range of policy options, including the ones not chosen, and a unified framework that examines crisis politics not just in deficit-debtor, but also in surplus-creditor countries. The main results of the project are published in the book "The Politics of Bad Options. Why the Eurozone's problems are so hard to resolve" (Walter/Ray/Redeker 2020, Oxford University Press).