The Political Economy of Macroeconomic Adjustment in the Eurozone Periphery

Health care cuts, reduced pension payments and slashed public sector employment: the euro crisis has placed an enormous burden on the Eurozone periphery to undertake fiscal reform. For some countries this pressure has resulted in the implementation of substantial adjustment policies; in others, policy recommendations have been met by widespread opposition and been proven difficult to realize. Research suggests that this variance in implementation can be explained by the prevalence of domestic interests that impede internal adjustment in some crisis countries, but not in others. The first part of this project studies the conditions, under which socio-economic interests are more willing to accept austerity. It examines group-level policy priorities towards tax increases and public spending policies and theorizes how fiscal preference coalitions look like during times of crisis. A second part of the project focuses on how domestic interests assess the alternative of austerity, namely a reconfiguration of the European Monetary and Economic Union (EMU). More specifically, it tests micro-level preferences towards the internal vs. external adjustment trade-off that characterizes countries facing economic and financial crises. In doing this, the project contributes to improving our understanding of the domestic politics and preferences that underpin macroeconomic adjustment in the Eurozone periphery. Empirically, the project relies on quantitative survey data on interest group policy preferences in Ireland, Spain and Greece as well as qualitative evidence, collected from semi-structured interviews.