On the Conditional Success of International Conditionality Policies (With Evidence from Greece and Spain During the Eurozone Crisis)
| Published date | 01 September 2015 |
| DOI | http://doi.org/10.1111/1758-5899.12198 |
| Date | 01 September 2015 |
On the Conditional Success of International
Conditionality Policies (With Evidence from
Greece and Spain During the Eurozone
Crisis)
Yannis Karagiannis
Institut Barcelona d’Estudis Internacionals
Nikitas Konstantinidis
University of Cambridge
Abstract
Does conditionality always work? If, as it appears, the answer is negative, why do certain externally incentivized countries
comply while others do not? To answer these questions we rely on cognitive psychology and dynamic Bayesian princi-
pal-agent games to develop a theory of downwards-sloping long-run supply curves. More specifically, we explain how,
when applied to an intrinsically motivated agent, external incentives imposed by an informed principal carry an informa-
tive signal which in the long run crowds out the agent’s intrinsic motivation. To probe the plausibility of the ensuing
hypotheses we compare the reformist pace of two centre-left governments of financially distressed Southern European
countries during the eurozone crisis, namely Greece’s Papandreou administration and Spain’s Rodr
ıguez Zapatero admin-
istration. Based on the analysis of more than 400 newspaper reports and 12 expert interviews we find positive support
for our theory: while Papandreou quickly admitted the need for far-reaching and politically costly reforms, Zapatero ini-
tially delayed all kinds of measures. But as European incentives kicked in, the strongly incentivized Papandreou went into
irreversible reform fatigue, while the softly incentivized Zapatero dedicated his last months in office to bring about
unprecedented reforms. We conclude with some indications about future research in this direction.
Policy Implications
•Many governments and international organizations believe in the across-the-board efficacy of conditionality poli-
cies.
•The efficacy of conditionality policies is conditional on the target government not being intrinsically motivated to
perform the task.
•When intrinsically motivated governments are given further additional external incentives, their intrinsic motiva-
tions is crowded out.
•When the intrinsic motivation of national governments is crowded out by external incentives, these governments
become ‘incentives junkies’.
•In Europe’s Economic and Monetary Union, supranational authorities should not automatically seek to always
impose external incentives on national governments.
Following the leading example of the International Mone-
tary Fund (IMF), over the past few decades the EU has
made extensive use of conditionality policies. Aspiring
member states need to fulfil certain criteria. If they do,
they may gain membership of the EU; if they do not, their
entry is postponed. Internally, too, members of the EU’s
Economic and Monetary Union (EMU) need to respect
some rules. If they do, their membership is not threatened,
and political and financial assistance may be offered; if
they do not, political support may become scarce and the
possibility of expulsion may be raised. This widespread
and far-reaching use of conditionality creates some ques-
tions. Are all national governments like the proverbial
shoemaker whose production effort is a positive function
of the payment he receives? If so, why do governments
which face similar incentives nevertheless exert different
©2015 University of Durham and John Wiley & Sons, Ltd. Global Policy (2015) 6:3 doi: 10.1111/1758-5899.12198
Global Policy Volume 6 . Issue 3 . September 2015
212
Research Article
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