Political conflict in the reform of the Eurozone
| Author | Fabio Wasserfallen,Thomas Lehner |
| DOI | 10.1177/1465116518814338 |
| Published date | 01 March 2019 |
| Date | 01 March 2019 |
| Subject Matter | Articles |
Article
Political conflict in the
reform of the Eurozone
Thomas Lehner
Centre of European Union Studies, University of Salzburg,
Salzburg, Austria
Fabio Wasserfallen
Centre of European Union Studies, University of Salzburg,
Salzburg, Austria
Abstract
The negotiations on the reforms of the Economic and Monetary Union were highly con-
flictual. This article analyses the dimensionsof conflict that structured these negotiations.
Using several dimension-reduction methods, we conduct an in-depth analysis of the ‘EMU
Positions’dataset, whichcodes the positions of all EU member statesover a broad range of
fiscal, financial, economic, and institutional integration proposals. The empirical findings
show that the political contestation in the reform of the Eurozone is one-dimensional
between advocates of fiscal transfer and discipline. On this one-dimensional scale, we
identify three broader coalitions, while Germany and France lead the two opposing
groups. This conflict structure provides a setting conducive to the constant (re-)negotia-
tion of compromises. We conclude the analysis with a discussion of several implications.
Keywords
Economic and Monetary Union, European integration, Eurozone, political conflict
Introduction
The political and social consequences of the Eurozone crisis were detrimental for
the European Union (EU) and the Economic and Monetary Union (EMU) (Foster
and Frieden, 2017; Hernande
´z and Kriesi, 2016; Kriesi, 2018). The crisis made
Corresponding author:
Fabio Wasserfallen, Centre of European Union Studies, University of Salzburg, Edmundsburg, 5020 Salzburg,
Austria.
Email: fabio.wasserfallen@sbg.ac.at
European Union Politics
2019, Vol. 20(1) 45–64
!The Author(s) 2019
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DOI: 10.1177/1465116518814338
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clear that the institutional and policy framework of the EMU was insufficient,
which led to the broad consensus that the EMU had to be reformed. The views,
however, on how the framework of the EMU should be changed differed strongly,
from calls of better enforced fiscal discipline to models of permanent fiscal trans-
fers. Against this backdrop, the fierce negotiations among member states during
the Eurozone crisis have shown how challenging it is to overcome the deep political
conflict, even when there is a broad agreement that reforms are needed. In this
article, we provide an in-depth investigation of the political contestation among
member states in the recent negotiations of EMU reforms.
This article contributes to the literature on EU and EMU politics by analysing the
underlying conflict structure(s) in the reform of the EMU with new data. The theoret-
ical part discusses several dimensions of conflict that potentially structure the political
contestation among member states. The classic dimensions of conflict in EU politics
are between more vs. less integration and the left vs. right of the political spectrum (Hix,
1999; Hooghe and Marks, 2001; Steenbergen and Marks, 2004) . The political economy
literature on the Eurozone crisis further adds the divide between advocates of fiscal
transfer and fiscal discipline as a key dimension of conflict (Armingeon and Cranmer,
2017; Beramendi and Stegmueller, 2017; Frieden and Walter, 2017). We may expect
that each of these conflict dimensions structures the politics of EMU reform in a one-
dimensional conflict space—or, alternatively, that different combinations of these
underlying conflicts span over a two-dimensional space.
We empirically investigate the dimensionality of the political conflict during the
Eurozone crisis with dimension-reduction methods using the ‘EMU Positions’ data-
set introduced in this special issue (Wasserfallen et al., 2019). The ‘EMU Positions’
dataset includes data on the positions of all EU member states and six EU institutions
for 47 contested issues, covering a broad range of economic, fiscal, financial, and
institutional integration proposals that were discussed between 2010 and 2015
(including policy proposals of the Six-Pack, Two-Pack, Fiscal Compact, European
Financial Stability Facility (EFSF), European Stability Mechanism (ESM), assis-
tance to Greece and the Banking Union). The first important finding of our empirical
analysis is that we can only identify one single systematic dimension of conflict,
namely the conflict between supporters of fiscal transfer vs. fiscal discipline. This
conflict structure explains the contestation in most of the 47 contested issues coded in
the ‘EMU Positions’ dataset. A complementary qualitative analysis of quantitatively
selected cases shows that different, quite idiosyncratic, reasons explain why some
contested issues deviate from the identified dominant conflict dimension.
The empirical analyses use different methods, such as Bayesian Ordinal Item
Response Theory, W-Nominate, and Basic Space Scaling, to estimate the ideal
points for each EU member state and the six EU institutions. Besides showing the
aggregated positioning of each member state, the spatial analysis of the ideal points
also highlights which coalitions of countries oppose one another. We identify three
broader coalitions. The Southern countries and Belgium support fiscal transfers,
whereas the fiscal discipline group includes Northern, Central, and East European
countries with the Netherlands and Finland as the most extreme countries. A
46 European Union Politics 20(1)
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