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This chapter argues that institutionalist accounts of punishment, crime, and inequality should look to the thinning of political ideologies and its institutional implications. It explores the claim according to which thin ideologies such as populism, technocracy and plebiscitarianism, have institutional ambitions and tend to incentivise reforms that favour executive discretion and a politics of disintermediation. This claim is illustrated by reference to Italy both during and after the Eurozone crisis. Italy functions as a starting point for a broader discussion of how ideologies might change institutions, and therefore the penal incentives that follow from particular institutional configurations. The chapter argues that institutional changes rooted in thin ideologies may have long-term effects on punishment by incentivising a more adversarial and retaliatory approach to conflict – and thence to crime and deviance – and dis-incentivising a more negotiated and reintegrative approach to conflict, including the type of interpersonal conflict represented by crime and deviance.

Why did the Eurozone crisis prove so difficult to resolve? Why were adjustment burdens distributed so unevenly and why did no country leave the Eurozone? Who supported and opposed different policy options and how did the distributive struggles both within countries and between countries shape crisis politics? This introductory chapter lays out the main research questions and puzzles motivating this book. It provides an overview about the trajectory of the crisis and highlights the unusual characteristics of the crisis, most notably the unequal distribution of crisis resolution costs between deficit-debtor and surplus-creditor countries in the Eurozone. It then presents the policy options available to policymakers in both crisis countries mired by debt and balance of payments problems, as well as surplus-creditor countries characterized by large current account surpluses. The chapter then presents a brief overview of the book’s main argument that societies’ and political actors’ vulnerability profiles play an important role in shaping crisis policies and politics. The chapter concludes with an outlook and brief summary of the book’s individual chapters and a discussion of the book’s contributions to research on the Eurozone crisis, crisis politics, and the role of trade-offs in policymaking more generally.

Much research has treated the Eurozone crisis as a sui generis event. Yet we can only examine exactly how the Eurozone crisis is distinct from other crises if we compare it to other, similar crises. This chapter therefore develops a comparative framework that allows for us to study the distributional trade-offs inherent in crisis management of a large set of crises, including the Eurozone crisis. It argues the relative costs of external vs. internal adjustment will shape crisis politics, including the willingness of these countries to accept harsh conditionality in return for external financial support. The chapter develops measures to compare national vulnerabilities to internal and external adjustment and analyzes the crisis responses for a sample of 142 crisis episodes that occurred in a sample of 122 countries between 1990 and 2014. Our analysis shows that the vulnerability profile is a useful tool for analyzing crisis responses across a wide variety of balance-of-payments (BOP) crises. It also demonstrates that the Eurozone crisis is unusual because all crisis countries were located in the “misery corner”: Deficit country vulnerabilities to both internal and external adjustments were exceptionally high, and vulnerabilities frequently increased over the course of the crisis. In such a setting, quick and decisive crisis solutions are hard to find.

Chapter 9 examines the output legitimacy of Eurozone crisis governance, based in its policy effectiveness and performance. The chapter begins by showing that the crisis was misframed as one of public debt rather than private debt and misdiagnosed as resulting from bad behavior rather than the structure of the euro. The narratives did not reflect the periphery’s pre-crisis low deficits and debt (except for Greece) or account for the impact of competitive wage deflation and current account surpluses in Germany, as well as for bank-spurred wage inflation in the periphery (especially by German and French banks). The chapter then argues that EU actors chose the wrong remedies—budgetary austerity and structural reform instead of growth through stimulus and investment—and failed to devise adequate solutions. This is evidenced by the EU’s lack of effectiveness in monetary policy and investment compared to the US and by the increasing divergence in performance between Northern and Southern Europe. To blame is the failure to complete the architecture of the euro with the necessary economic instruments, not the fact that the Eurozone would never be an Optimum Currency Area (OCA). At fault were equally the excessive socioeconomic costs of austerity, reflected in levels of unemployment, inequality, and poverty, and the perversity of EU-led structural reforms. These “one size fits all” socioeconomic policies failed to take account of differences in national varieties of capitalism and growth models, while taking a tremendous toll on countries under conditionality—not just Greece but also Portugal, Spain, Italy, and even Ireland.

In the wake of the sovereign debt crisis, some of the most advanced economies in the world turned to the IMF for financial assistance. Not only did the Eurozone countries ask for the Fund’s help; they also incorporated the IMF into the institutional architecture for handling crises in the European Monetary Union. This chapter uses competence–control theory to shed light on the puzzles raised by the decision to enlist the IMF in Eurozone crisis management. Firstly, the chapter argues that the Eurozone’s motivation for enlisting the IMF can be found in the competence deficit its governors confronted in managing the crisis. In particular, Eurozone countries lacked sufficient competence (including expertise, money, and credibility) to formulate and enforce adjustment in crisis-hit countries. By enlisting the IMF, Eurozone countries acquired the necessary competence but had to share control. Secondly, the chapter shows that the tradeoff between competence and control shifted over time: even after creating their own crisis management competencies, member states continued to enlist the IMF as a way to reduce the control problems that creditor states confronted in enforcing adjustment in debtor countries.

Chapter 1 introduces the book by briefly discussing the Eurozone crisis and how it has contributed to Europe’s crisis of legitimacy. The chapter begins by describing EU actors’ initial responses to the Eurozone crisis, focused on “governing by the rules and ruling by the numbers” and characterized by policies of austerity and structural reform. It then discusses such actors’ subsequent shift to reinterpreting the rules “by stealth” in reaction to deteriorating economic performance and growing political discontent. The chapter next connects the problems related to Eurozone policies, politics, and processes to questions of legitimacy. It defines legitimacy in the EU studies terms of input (political legitimacy), output (performance legitimacy), and throughput (procedural legitimacy) and considers how the EU’s institutional context has complicated Eurozone crisis governance. It then sketches out EU actors’ different pathways to legitimacy, related to their differences in power, position, and bases for legitimacy. The chapter ends with a methodological note about the book’s analytic framework of discursive institutionalism, explaining how its focus on ideas and discursive interactions in institutional context provides a useful bridge to considerations of both power and legitimacy.

The politics of adjustment in deficit countries were characterized by strong domestic discontent, leading to significant political upheaval. Why did policymakers in these countries nonetheless implement unprecedented austerity and painful structural reforms? Zooming in on the domestic drivers of this adjustment choice, this chapter highlights mechanisms by which internal adjustment grew more politically feasible in deficit countries. The chapter draws on original survey data on the policy preferences of 359 economic interest groups in Ireland, Spain and Greece. It finds that while groups were consistently negative to a full range of scenarios by which external adjustment could be achieved in deficit countries, their preferences toward austerity measures and structural reforms varied much more widely. This variation, it is argued, facilitated the formation of pro-internal adjustment coalitions in deficit country contexts. Moreover, the chapter shows that opportunity costs mattered. While opposed to internal adjustment in absolute terms, a large majority of interest groups in deficit countries grew pliable to the prospect of it when faced with a choice between this and the alternative of abandoning the euro; even if internal adjustment programs were comprised of policies that groups themselves distinctly opposed.

This chapter provides insight into the manner in which national parliaments (NPs) performed their roles of representation and communication in the context of the Eurozone crisis. It examines two forms of involvement: the authorization of bail-out measures and ratification of institutional innovations through measures such as the Treaty on Stability, Coordination, and Governance in the Economic and Monetary Union (Fiscal Compact); and public communication through plenary debates addressing these decisions and the governance of the Eurozone generally. The analysis compares three parliaments of Eurozone Member States that established very different institutional and party political contexts for public debate: the Austrian Nationalrat, the French Assemblée nationale, and the German Bundestag. The aim is to show that, in addition to differences in the overall activity of legislatures in ratifying and debating Eurozone crisis decisions, the three parliaments set different conditions for the public interaction between three sets of political actors with different roles in the justification of the management of the Eurozone crisis: representatives of national executives, members of parliamentary majority groups, and groups in the parliamentary opposition.

This chapter is about constitutional defence and emergency politics in the federation. It shows that the government of the Eurozone crisis is a manifestation of federal emergency politics. This explains why the dominant theories of the ‘state of exception’, modelled on the political form of the state, do not apply to the EU. The chapter first develops a theory of federal constitutional defence based on the theory and praxis of the antebellum United States (the doctrine of states’ rights) and the nineteenth-century German Confederation (the theory of federal execution and federal intervention). On this basis, the chapter then analyses both ‘Euro-crisis law’ and the contestation of the emergency government of the Eurozone crisis by EU Member States, importantly the Gauweiler and Weiss cases. The chapter concludes with a discussion of the precariousness of federal emergency politics in general and the balance struck with the ‘Greek crisis’ in particular.

How did the preferences of interest groups shape the design and contentiousness of crisis policies in deficit countries? And how did external actors influence their crisis responses? This chapter investigates these questions by drawing on a wealth of primary and secondary sources including newspaper coverage, voter public opinion data, interest group position papers, sovereign bailout documentation, and original qualitative evidence from seventeen in-depth interviews with national interest group representatives in Ireland, Spain, and Greece. There was a large consensus among both interest groups and voters across all three countries that external adjustment—that is, unilateral euro exit—should be avoided at all cost. This left financing and internal adjustment as the only options, and significant conflicts flared up in all three countries about how the costs associated with internal adjustment (and to a lesser extent financing) should be distributed. Within the confines set by the Troika, which effectively narrowed down the range of options available to deficit countries, interest groups pushed for reforms to which they were least vulnerable. Business interests, for example, generally supported adopting comprehensive spending-based consolidation measures and labor market reform. Conversely, labor unions and social policy groups actively supported policies that would entail stronger burden-sharing between firms and workers. Overall, internal adjustment policies adopted across all three cases generally reflected the preferences of employer associations more than those of workers, but especially in Spain and Greece, this was associated with considerable political upheaval.

Chapter 4, which examines the development of macro-economic policymaking in Europe, argues that the internationalization and regionalization of macro-economic policymaking are products of concrete internal struggles fought at the domestic level within European states over the implementation of anti-inflationary monetary policies and the dismantling of the main institutional expressions of the post-war Keynesian consensus. Looking at the development of European economic integration from the 1950s to the present day, the chapter differentiates between forms of cooperation in the heyday of the post-war Keynesian consensus (the ECSC, the Treaty of Rome) and cooperation driven by the collapse and movement away from that consensus (European Monetary System, Single European Act, monetary union). These two periods of integration correspond to very different forms of statehood. The chapter ends with a detailed account of the Eurozone crisis of 2008–12 and how this crisis has both challenged and reinforced the member statehood paradigm.

Fundamental gaps in EMU’s economic governance structure make it an incomplete common currency area (CCA). These gaps channeled the international financial crisis into a split between its core and peripheral sub-central political units (member states), inflicting enormous economic and social costs on the latter and retarding recovery elsewhere in Europe. The central level of a complete CCA, like the US, has the fiscal and financial regulatory as well as monetary capacities for governing the single economy into which the common currency integrates the sub-central units. All three capacities are essential to counteracting a market economy’s inherent instability. However, EMU’s central level is equipped only with monetary capacity, relegating the other two capacities to its sub-central units. EMU’s governance structure thereby makes them vulnerable to the divergent effects of financial market instability and consequent recession. These effects can only be ameliorated with the central fiscal and regulatory capacities that EMU does not have.

Chapter 4 provides an overview of the Eurozone crisis, to serve as a background for the subsequent four chapters which discuss in turn each of the four EU actors’ particular pathways to legitimacy, including their sources of power and grounds for throughput legitimacy, along with the Janus-faced public perceptions of their Eurozone governance. The chapter begins with a brief review of the history of European Monetary Union (EMU), describing the trials and tribulations in the run-up to the Maastricht Treaty and member states’ very different ideas and discourse related to monetary integration, as illustrated by the differences in German, French, and Italian views. It then considers what happened at the time of the introduction of the single currency. The chapter follows with the initial responses to the Eurozone crisis during its fast-burning phase, characterized by a doubling down on the rules of the Stability and Growth Pact. It elaborates on the trials and tribulations at the inception of the crisis, on EU actors’ initial actions and reactions, and on institutional innovations such as banking union. It also provides further details on legislation and treaty agreements, as well as on the ideas underpinning the policy responses. The chapter ends by considering the benefits and drawbacks of EU actors’ subsequent reinterpretation of the rules by stealth during the Eurozone crisis’ slow-burning phase, arguing that although rules reinterpretation may have improved policy responses (output), not admitting this raised questions of accountability and transparency (throughput), while failing to address problems of political legitimacy (input).

After briefly setting the Eurozone crisis in international context, this Conclusion asks how the EU may move forward, to re-envision Eurozone governance while resolving the EU’s (euro) crisis of legitimacy in ways that ensure greater input, output, and throughput legitimacy. To do so, it recommends reforming Eurozone governance through a more fine-tuned approach to EU-level macroeconomic coordination via more differentiated country-specific targets debated by EU actors. And it proposes decentralizing the administration of the European Semester to ensure a more bottom-up process that is more sensitive to national varieties of capitalism and growth models. Only in so doing, the chapter argues, can there be greater democratic input at both EU and national levels, which could serve to reduce the citizen discontent driving populism. But for this to work, more solidarity mechanisms along with more resources are required not just for the Eurozone but equally across crisis areas, to ensure successful output performance. Finally, the chapter suggests that EU governance itself requires rethinking through more differentiated integration. Rather than a “hard core” moving forward, or Europe “à la carte,” the most effective future integration would be by seeing recognizing the EU as it already is: a “soft core” Europe of clusters of member states in overlapping policy communities, administered by one overall set of institutions.

Compared with similar crises under previous rules-based monetary regimes, the Eurozone crisis has seen significant contagion risks, subjecting each member state to what happens outside. In that respect, the crisis revealed an institutional inconsistency in Eurozone governance. As risks were collective, so too should have been insurance against them. Previous rules-based regimes—the Gold Standard and the Bretton Woods system—did not suffer from this inconsistency because those that paid into the available “insurance schemes” were those that benefited from them. It should thus not be a surprise that decisions on financial assistance early in the Eurozone crisis were hit by an intergovernmental conflict over distributing the burden of financial stability provision, or that markets felt reassured only when the European Central Bank assumed the role of lender of last resort, providing the type of insurance that matched the prevailing type of risk.

This chapter assesses the Eurozone debt crisis as a conflict between creditor and debtor countries, pitting northern member states against the southern periphery, before looking at the distributional politics of austerity in the smaller southern Eurozone states of Greece and Portugal. The Eurozone crisis placed the European Union under extraordinary strain, as markets panicked, leaving the weaker and more indebted member states struggling to avoid financial collapse. The bailouts of Greece, Ireland, and Portugal may have saved them from crashing out of the single currency, but the price was harsh austerity for their citizens and an accumulation of debt comparable to wartime. Meanwhile, the political costs of the euro crisis can be seen in the destabilization of European party systems. Not only did Greece embrace anti-system politics, electing a government opposed to the bailout regime, but the northern European countries that had put up much of the money for the rescues also saw their own political backlash.

This chapter provides the first account of IMF commentary on and interventions in the French economic policy debate following the crash to analyse how the Fund has sought to inflect French policy settings and approaches. It also situates French macroeconomic policy developments in the context of the European policy debate to demonstrate how the IMF has worked to influence reforms to the Eurozone’s architecture. Drawing on interviews with French policy elites and advisors, as well as members of Fund missions to France, it demonstrates how the French government, alongside the IMF, sought a less pro-cyclical approach and to open up ‘fiscal space’ for growth-oriented policies within European economic and monetary arrangements. However, key centres of power, notably the German government, the European Commission, and the European Central Bank prioritized ‘moral hazard’ and the ‘crisis of debt’ narratives, whose policy corollaries were ever-tighter fiscal discipline and ramped-up austerity.

Chapter 8 discusses the European Parliament’s pathway to legitimacy, and its transition from having “no size at all” in Eurozone governance to increasing influence. The chapter begins with an analysis of the EP’s sources of power—which were initially very few, given its marginalization in Eurozone governance—and of its growing throughput legitimacy. Although the most input legitimate of EU actors in principle, in practice it has had limited relevance to citizens and has been far removed from them as well as from national parliaments—themselves the biggest losers in Eurozone crisis governance. But the EP’s lack of remit did not stop it from using its input legitimacy to enhance its own procedural exercise of “voice,” deployed increasingly critically to demand accountability from other EU actors. The EP also slowly gained influence as the “go-to” body for other EU actors in search of legitimation via a political accountability forum. The chapter follows with a discussion of the Janus-faced public perceptions of the EP’s role in Eurozone governance, moving from views of the European Parliament as a talking shop increasingly toward its being a potential equal partner. The chapter shows that initially the EP was a talking shop that largely went along with Council and Commission initiatives, in keeping with its minimal powers, but that over time the EP gained increasing powers both formally, through legislation, and informally, in particular as other EU actors turned more and more to the EP for legitimation by giving accounts to an input-legitimate accountability body.

The chapter maps the impact of European integration on policy-making in the Czech Republic. In particular, it focuses on the institutional dimension of transformation of Czech policy-making which included power shift towards executive branch at the expense of Czech parliament as well as the struggle between the ministry of foreign affairs and the prime minister’s office for leadership in the Europeanised policy-making in the Czech Republic. Furthermore, the chapter covers major events that influenced the Europeanization of Czech policy-making, such as the 1998-2002 accession talks, the Convention for Future of Europe in years 200-2002, Czech Presidency in 2009 or Eurozone crisis in years 2010-2012.