Till austerity do us part? A survey experiment on support for the euro in Italy
| Published date | 01 September 2021 |
| Author | Erik Neimanns,Lucio Baccaro,Björn Bremer |
| Date | 01 September 2021 |
| DOI | 10.1177/14651165211004772 |
| Subject Matter | Articles |
Article
Till austerity do us part?
A survey experiment
on support for the
euro in Italy
Lucio Baccaro
Max Planck Institute for the Study of Societies, Cologne,
Germany
Bj€
orn Bremer
Max Planck Institute for the Study of Societies, Cologne,
Germany
Erik Neimanns
Max Planck Institute for the Study of Societies, Cologne,
Germany
Abstract
The COVID-19 pandemic worsened Italy’s fiscal outlook by increasing public debt. If
interest rates were to rise, it would become more likely that Italy experiences a
financial crisis and requires a European bailout. How does making EU funds conditional
on austerity and structural reforms affect Italians’ support for the euro? Based on a
novel survey experiment, this article shows that a majority of voters chooses to remain
in the euro if a bailout does not involve conditionality, but the pro-euro majority turns
into a relative majority for ‘Italexit’ if the bailout is contingent on austerity policies.
Blaming different actors for the fiscal crisis has little effect on support. These results
suggest that conditionality may turn Italian voters against the euro.
Keywords
Austerity, euro, Italy, public opinion, survey experiment
Corresponding author:
Bj€
orn Bremer, Max Planck Institute for the Study of Societies, Paulstraße 3, 50676 Cologne, Germany.
Email: bremer@mpifg.de
European Union Politics
!The Author(s) 2021
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/14651165211004772
journals.sagepub.com/home/eup
2021, Vol. 22(3) 401–423
Introduction
The COVID-19 pandemic has led to a severe deterioration of the fiscal outlook of
eurozone governments, particularly in Italy. Italian public debt increased to nearly
160% of gross domestic product (GDP) in 2020. Furthermore, for the past
25 years, Italy’s growth rate has usually been lower than the interest rate it pays
on the stock of debt. If such circumstances were to persist, financial markets
may perceive Italy’s public debt to be unsustainable. This makes a resurgence
of tensions in sovereign bond markets and a revival of the euro crisis a
distinct possibility.
According to the rules introduced in the first stage of the euro crisis, a country
that is unable to finance its debt at acceptable interest rates should apply for an
emergency loan from the European Stability Mechanism (ESM). To reduce moral
hazard, countries that receive financial assistance have to sign a Memorandum of
Understanding with the ESM (and possibly with the International Monetary
Fund (IMF) and the European Central Bank (ECB) as well), pledging to introduce
a series of austerity measures and structural reforms as a condition for assistance.
An ESM program is a prerequisite for Outright Monetary Transactions (OMT)
by the ECB,
1
i.e., potentially unlimited purchases of government bonds by the
central bank.
One of the problems with this crisis resolution mechanism is that the austerity
measures imposed on crisis countries are highly unpopular (Ferna
´ndez-Albertos
and Kuo, 2016, 2020; Franchino and Segatti, 2019; Jurado et al., 2020) and lead to
electoral volatility, public protests, and the emergence of anti-system forces (Bojar
et al., 2021; Bremer et al., 2020; Hu
¨bscher et al., 2020). Still, existing research
shows that voters in most crisis-ridden countries strongly support the euro and
are unwilling to leave it despite the costs associated with austerity (Clements et al.,
2014; Hobolt and Wratil, 2015; Roth et al., 2016). In July 2015, Greek voters
rejected the European Union (EU) bailout package in a popular referendum,
but research shows they still wanted to remain in the common currency (Jurado
et al., 2020; Walter et al., 2018; Xezonakis and Hartmann, 2020). This unwilling-
ness to leave, despite the costs of austerity, strengthened the hand of ‘creditor’
countries and allowed them to shift the burden of adjustment on ‘debtor’ countries
during the euro crisis (Copelovitch et al., 2016; Frieden and Walter, 2017).
In this article, we ask how Italian voters would evaluate the trade-off between
remaining in the euro and implementing austerity in case of a fiscal crisis. To what
extent would they accept the costs of austerity for the promise of a bailout and
continued membership in the common currency? Italy is the third-largest economy
in the eurozone, which makes it systemically important. Many commentators,
therefore, believe that the euro stands or falls with Italy, and the possibility of
exit is far from purely academic. In the wake of the euro crisis, Eurosceptic parties
emerged that questioned Italy’s membership in the eurozone. The Five Star
Movement (M5S) included the promise of a referendum on the permanence in
the euro in its electoral manifesto of 2014,
2
while the Lega proposed a negotiated
402 European Union Politics 22(3)
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