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Austerity in the European periphery: the Irish experience

2016-01-28, Hardiman, Niamh, Blavoukos, Spyros, Dellepiane, Sebastian, Pagoulatos, George

Ireland has come to be seen as an exemplary case of the successful practice of austerity, both economically and politically. But these inferences would be misleading. The real story about fiscal adjustments in Ireland is more problematic, the reasons for recovery are more complex, and the political consequences are a good deal more nuanced. This paper sets the Irish experience alongside that of the other Eurozone periphery countries. It argues that these countries' recovery prospects depend on the EU economic policy framework, but that Ireland’s connections to non-Eurozone economies also shape its growth prospects. Political stability is problematic in all the periphery countries, with the rise of challenger parties articulating values and priorities that may be difficult to accommodate within the current European policy regime. This is connected to a wider problem of the decay of older political identities and loyalties and the emergence of a new legitimation gap for EU member states.

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The European Context of Ireland’s Economic Crisis

2010, Dellepiane, Sebastian, Hardiman, Niamh

The current economic crisis has hit all European countries hard, but some are much more severely affected others. The problems manifest in European peripheral countries, especially Ireland, Spain, and Greece, have roots in domestic policy mistakes. However, the European context of these policy profiles also needs to be taken into account. The creation of the Euro initially yielded large credibility gains for the weaker economies, extending low interest rates across the Eurozone. But it also introduced a set of perverse incentives toward fiscal expansion which were supposed to be managed at domestic level. Weak European coordinating capacity meant there were few effective external disciplines on national decision-making. The sanctions built into the Stability and Growth Pact proved more controversial and therefore less constraining than originally envisaged. The problems accumulating in the weaker economies made them particularly exposed to crisis when the downturn came. The crisis is not merely one of peripheral economies' policy errors, but extends to the design of European decision-making and the management of monetary union. These issues are explored with reference to the Irish case: the crisis of the Irish and other peripheral economies points to a crisis at the heart of European politics.

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Austerity in the European periphery - the Irish experience

2017-09-14, Hardiman, Niamh, Dellepiane, Sebastian, Blavoukos, Spyros, Pagoulatos, George

Ireland has come to be seen as an exemplary case of the successful practice of austerity, both economically and politically. But these inferences would be misleading. The real story about fiscal adjustments in Ireland is more problematic, the reasons for recovery are more complex, and the political consequences are a good deal more nuanced. This paper sets the Irish experience alongside that of the other Eurozone periphery countries. It argues that these countries' recovery prospects depend on the EU economic policy framework, but that Ireland's connections to non-Eurozone economies also shape its growth prospects. Political stability is problematic in all the periphery countries, with the rise of challenger parties articulating values and priorities that may be difficult to accommodate within the current European policy regime. This is connected to a wider problem of the decay of older political identities and loyalties and the emergence of a new legitimation gap for EU member states.

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Fiscal politics in time: pathways to fiscal consolidation, 1980-2012

2012-12, Dellepiane, Sebastian, Hardiman, Niamh

The comparative study of debt and fiscal consolidation has acquired a new focus in the wake of the global financial crisis. This leads us to re-evaluate the literature on fiscal consolidation that flourished during the 1980s and 1990s. The conventional approach segments episodes of fiscal change into discrete observations. We argue that this misses the dynamic features of government strategy, especially in the choices made between expenditure-based and revenue-based fiscal consolidation strategies. We propose a focus on pathways rather than episodes of adjustment, to recapture what Pierson terms 'politics in time'. A case-study approach facilitates analysis of complex causality that includes the structures of interest intermediation, the role of ideas in shaping the set of feasible policy choices, and the situation of national economies in the international political economy. We support our argument with qualitative data based on two case studies, Ireland and Greece, and with additional paired comparisons of Ireland with Britain, and Greece with Spain.

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Fiscal politics in time: Pathways to fiscal consolidation in Ireland, Greece, Britain, and Spain, 1980-2012

2015-05, Hardiman, Niamh, Dellepiane, Sebastian, Hardiman, Niamh

The comparative study of debt and fiscal consolidation has acquired a new focus in the wake of the global financial crisis. This paper re-evaluates the literature on fiscal consolidation that flourished during the 1980s and 1990s. The conventional approach to explanation is based on segmenting episodes of fiscal change into discrete observations. We argue that this misses the dynamic features of government strategy, especially in the choices made between expenditure-based and revenue-based fiscal consolidation strategies. We propose a focus on pathways rather than episodes of adjustment, to capture what Pierson terms 'politics in time'. A case-study approach facilitates analysis of complex causality that includes the structures of interest intermediation, the role of ideas in shaping the set of feasible policy choices, and the situation of national economies in the international political economy. We support our argument with qualitative data based on two case studies, Ireland and Greece, and with additional paired comparisons of Ireland with Britain, and Greece with Spain. Our conclusions suggest that the conventional literature, by excluding key political variables from consideration, may distort our understanding and result in misleading policy prescription.

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The New Politics of Austerity: Fiscal Responses to the Economic Crisis in Ireland and Spain

2012-02, Dellepiane, Sebastian, Hardiman, Niamh

This paper adopts a new analytical approach to explaining choices in fiscal politics in Ireland and Spain between 2008 and 2010, in response to international economic crisis. It adopts a comparative cross-national research design to explore why two countries with similar pre-crisis fiscal profiles adopted radically different strategies in the initial phase of the crisis: Ireland adopted an orthodox deficit-reduction strategy, while Spain implemented a ‘heterodox’ stimulus fiscal package. Yet by mid-2010, Spain’s fiscal stance had converged with Ireland’s, as the wider European crisis deepened and the scope for autonomous national policy choice narrowed. The paper tracks this shift in a second stage of the research design, examining within-country variation over time, to provide a nuanced and sophisticated analysis of strategic choices at critical moments. It argues that the shift toward a European politics of austerity is different in a number of important ways from the older politics of fiscal consolidation, and that this has far-reaching implications not only for the evolution of European integration, but also for the balance between democratic politics and transnational markets.

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Building on easy money: the political economy of housing bubbles in Ireland and Spain

2013-10, Dellepiane, Sebastian, Hardiman, Niamh, Las Heras, Jon

This paper undertakes a structured, focused case-study comparison of housing bubbles in Ireland and Spain, based on the selection of two most-different cases that nonetheless share a common outcome of interest. Both countries were exposed to the same set of changes in their international policy environment in the late 1990s and early 2000s, in the form of a low interest rate regime associated with the creation of European Monetary Union (EMU). The two countries have very different economic structures, different political decisionmaking profiles, and different relationships between the political and banking systems. Yet these two countries had the most extreme experience of housing bubbles during the 200os, and both suffered a similar construction-related economic collapse that ruined their respective banking systems after 2008. The paper argues that the decision-making taking place within their very different domestic institutional frameworks was subordinated to the fact that they shared a similar form of international vulnerability. Both were extremely open to mobile international capital during the 2000s. Their vulnerability to financialization resulted in a common experience of very rapid asset price inflation, which left both countries particularly exposed when the international financial collapse took place. The shared experience of European ‘peripherality’ meant that two countries belonging to different ‘varieties of capitalism’ ended up with very similar kinds of economic collapse

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Governing the Irish economy: a triple crisis

2011-02-21, Dellepiane, Sebastian, Hardiman, Niamh

The international economic crisis hit Ireland hard from 2007 on. Ireland’s membership of the Euro had a significant effect on the policy configuration in the run-up to the crisis, as this had shaped credit availability, bank incentives, fiscal priorities, and wage bargaining practices in a variety of ways. But domestic political choices shaped the terms on which Ireland experienced the crisis. The prior configuration of domestic policy choices, the structure of decision-making, and the influence of organized interests over government, all play a vital role in explaining the scale and severity of crisis. Indeed, this paper argues that Ireland has had to manage not one economic crisis but three – financial, fiscal, and competitiveness. Initial recourse to the orthodox strategies of spending cuts and cost containment did not contain the spread of the crisis, and in November 2010 Ireland entered an EU-IMF loan agreement. This paper outlines the pathways to this outcome

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The politics of fiscal effort in Ireland and Spain: market credibility versus political legitimacy

2014-02, Dellepiane, Sebastian, Hardiman, Niamh

Austerity measures in response to Eurozone crisis have tended to be planned and implemented as if only the technical parameters of budget management mattered. But policies that impose budgetary hardships on citizens go right to the heart of voter expectations about what it is both appropriate and acceptable for governments to do. Pro-cyclical measures that worsen an already difficult situation in a recession run counter to deep-seated norms and expectations in European countries, built up over decades of democratic governance, whereby governments are expected to provide offsetting protection for their citizens against the vicissitudes of the market. Moreover, if austerity measures are viewed as externally imposed by international authorities, new kinds of challenges to political legitimacy are likely to arise. While Greece is commonly seen as a critical test case, this chapter explores these issues through the contrasting experiences of Spain and Ireland.

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The politics of fiscal effort in Spain and Ireland : Market credibility versus political legitimacy

2013-11, Dellepiane, Sebastian, Hardiman, Niamh

Austerity measures in response to Eurozone crisis have tended to be conceived, debated, and implemented as if only the technical parameters of budget management mattered. But policies that impose budgetary hardships on citizens, whether in the form of increased taxes or cuts to public spending go right to the heart of voter expectations about what it is both appropriate and acceptable for governments to do. Pro-cyclical measures that worsen an already difficult situation in a recession run counter to deep-seated norms and expectations in European countries, built up over decades of democratic governance, whereby governments are expected to provide offsetting protection for their citizens against the vicissitudes of the market. If austerity measures are held to be unavoidable in response to market turbulence, and especially if this view is underwritten by international authorities, new challenges of political legitimation are likely to arise. These issues are explored through the experiences of Spain and Ireland.