Eurozone bailouts and national democracy: Detachment or resilience?
| Author | Frank Schimmelfennig,Dominik Schraff |
| Published date | 01 September 2019 |
| Date | 01 September 2019 |
| DOI | http://doi.org/10.1177/1465116519848846 |
| Subject Matter | Articles |
Article
Eurozone bailouts and
national democracy:
Detachment
or resilience?
Dominik Schraff
Center for Comparative and International Studies, ETH
Zurich, Zurich, Switzerland
Frank Schimmelfennig
Center for Comparative and International Studies, ETH
Zurich, Zurich, Switzerland
Abstract
How did the Eurozone bailouts affect national democracies? Recent research indicates
strong citizen detachment due to the external constraints imposed by bailout programs
on national autonomy. This paper re-examines the detachment thesis by broadening the
view toward multiple dimensions of democracy and effect heterogeneity across time
and space. Using the generalized synthetic control method, we find a negative effect of
bailouts on satisfaction with democracy and turnout but show that effects vanish after
several years and vary strongly across bailout cases. In addition, we find resilient
attitudes and behaviors in spite of national democratic institutions that continue to
deteriorate. These findings indicate that economic policy outcomes have a stronger
influence on satisfaction with democracy and electoral turnout than the quality of the
democratic process.
Keywords
Bailout, democracy, Eurozone, generalized synthetic control method
Corresponding author:
Dominik Schraff, Center for Comparative and International Studies, ETH Zurich, Haldeneggsteig 4, Zu¨rich
8092, Switzerland.
Email: dominik.schraff@eup.gess.ethz.ch
European Union Politics
2019, Vol. 20(3) 361–383
!The Author(s) 2019
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DOI: 10.1177/1465116519848846
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Introduction: The Eurozone crisis and democratic detachment
In postwar European economic history, the Eurozone crisis stands out for the hard-
ship it has caused citizens, the level of domestic and intergovernmental conflict it
created, and the challenges it posed for European integration and national political
systems. The political and economic stakes of the Eurozone crisis were enormous.
Economic and Monetary Union (EMU) was the flagship project of European inte-
gration in the 1990s, crowning decades of progressive economic integration. For all
its constructional flaws (Copelovitch et al., 2016), a breakdown of the Eurozone
would have had catastrophic economic consequences and raised serious doubts
about the viability of the European Union (see, e.g. the scenarios described in The
Economist, 26 May 2012, 26–27 and by Petersen and B€
ohmer, 2012). Accordingly,
creditor and debtor country governments agreed on the need to prevent sovereign
defaults and preserve the Eurozone. Even so, they fought hard over the rescue con-
ditions, with both groups trying to shift the burdens of adjustment to each other
(Frieden and Walter, 2017; Lehner and Wasserfallen, 2019; Schimmelfennig, 2015).
The creditor countries reluctantly agreed to bail out the debtor countries but
insisted that the rescue funds would come as credits and on the condition of aus-
terity measures supervised by a Troika of international institutions: the European
Commission, the European Central Bank (ECB), and the International Monetary
Fund (IMF). Austerity implied cuts in pensions, social benefits, and wages as well
as tax raises. It also led to massive unemployment, especially among the young.
Austerity caused mass protests and changes of government in the affected
countries (Bosco and Verney, 2012). Across the Eurozone, Eurosceptic parties
have been on the rise—with radical right parties mobilizing against immigration
and financial transfers in the north, and radical left parties mobilizing against
austerity in the south (Brack and Startin, 2015). At the same time, public support
for European integration plunged toward historic lows (Debomy, 2013), in partic-
ular in the traditionally EU-friendly European south.
Recent studies argue, however, that the political effects of the Eurozone crisis
reach beyond economically motivated dissatisfaction with and protest against the
national government and the EU. Rather, the crisis is said to erode democracy and
citizens’ diffuse affective support for it (Armingeon et al., 2016; Matthijs, 2017;
Ruiz-Rufino and Alonso, 2017). According to this argument, citizen detachment
from national democracy is an effect of the technocratic supranational construc-
tion of the Eurozone, and of how it has undermined the democratic process in the
management of the crisis.
EMU removes monetary policy authority from the arena of national democratic
politics and transfers it to a supranational body of experts (the ECB) bound by
fixed policy objectives (price stability above all). The ECB is independent from
member state governments and not accountable to the European Parliament.
In addition, it binds Eurozone countries to the excessive deficit rules of the
Stability and Growth Pact and to the review and sanctioning procedures carried
out by the European Commission, another technocratic body.
362 European Union Politics 20(3)
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