Societal foundations of governmental preference formation in the Eurozone crisis

Abstract

Why is the management of the Eurozone crisis marked by persistently diverging preferences among members of the European Monetary Union (EMU) despite decades of European integration, institution building, and commitments to joint action? While some EMU member countries favour fiscal restraint and strict conditions for financial help to crisis-ridden countries, others advocate discretionary fiscal policies and lax conditions for aid. The latter group demands the creation of Eurobonds, while the former group rejects these demands since Eurobonds would communitarise public debt without a common economic policy. These divergences rest on differences in competitiveness and solvency, but also point to ideational differences regarding the role of politics in steering the economy such as in deficit-spending and public debt. Hence, controversies seem to express differences in material interests as well as ideational positions. Thus, I argue that diverging preferences in European financial governance are shaped by value based societal ideas and material interests dominant in the domestic politics of EMU members. Following the societal approach to governmental preference formation, this argument is analysed in cross-country comparisons of the domestic variables and governmental positions in the Eurocrisis.