Comments on French Crisis and Germany’s Role

Here are some comments from Professor Schmidt in response during a recent interview on the role of Germany in the recent restructuring of the French government:

On the role of Germany in the restructuring: It played no direct role, but of course indirectly, Germany does. First, through its ordo-liberal ideas that underpin the Stability and Growth Pact and all the subsequent packs (six pack, two pack) and pacts (fiscal compact), and a discourse that has promoted the ‘Stability Culture,’ and policies focused on austerity and structural reform as the only answer. But why blame only Germany? Its allies include the ECB, that also believes in stability, and has pushed austerity and structural reform as a quid pro quo for its own monetary policies; the Commission, that has only begun to show flexibility very recently; and a variety of member-states worried about a ‘transfer union’ in which the core would have to pay for the periphery. Moreover, France (under Sarkozy) signed up to all of this as well, so Hollande is stuck with it, whether he likes it or not.

That said, Montebourg’s comments about the German obsession with austerity were indeed crucial to his ousting for two reasons. First, he is a Minister in a government in which the President had just announced continued austerity and structural reforms in line with ‘the line’ of the EU. Breaking ranks in this way is never appreciated by any Prime Minister or President of a country. Second, no doubt there were already frictions with the PM, and this was the opportunity to get rid of him. Montebourg may himself have welcomed it, so that he is no longer associated with a President (and government) he plans to run against in the next Presidential elections. But this means that there will be no vocal representatives of the left of the Socialist Party in the government—a problem for Hollande in terms of keeping his party entirely behind him.

Finally, on whether Berlin with change its European policy, the answer is not in the discourse, but possibly in the practice. My sense is that the discourse will continue to focus on ‘staying the course’ of austerity and structural reform, but that the Commission will exercise increasing flexibility in meeting the criteria, and the Council is likely to try to provide some investment to promote growth. I think by now everyone recognizes that these policies are not working, and you can’t just blame the Greeks, the Italians, and the French for it!

If I am asked: will policy change a lot soon? The answer is no. However, policy is likely to shift incrementally over time, in particular if and when the Council itself becomes increasingly represented by social-democratic member-state leaders.

Hope this responds to your questions! Do let me know whether you print something based on this.

Vivien Schmidt Awarded Research Fellowship

Recently, I was awarded a research fellowship by the European Commission, Directorate General of Economic and Financial Affairs (DG ECFIN).  It involves my producing a paper entitled “The Political Economy of the European Monetary Union: Rebuilding Trust and Support for Economic Integration.”  The fellowship program itself encompasses approximately ten fellows,  all economists except for me (a political scientist).  In addition to writing a very long research paper for publication in DG ECFIN’s paper series, I am to participate in three workshops over the course of a year (june 2014-June 2015), plus be available for 30 hours of consultations.  The fellowship program was established in view of the seating of the newly European Parliament and the newly appointed Commission President and Commissioner head of DG ECFIN.  We are to provide advice to the new Commissioner with regard to current and future policy.  In my own case, I will be considering not just how to rebuild trust and support for economic integration but the problems with the current policies that make rebuilding trust very difficult.

In my research, I will be examining not just problems with the economic policy performance (often termed output legitimacy in EU studies ) and the increasingly volatile politics resulting from citizens’ view of the EU as unresponsive to their concerns (input legitimacy) but also the quality of the governance processes (which I term ‘throughput’ legitimacy).  I will be interviewing of EU officials to get a fuller sense of  the political dynamics of crisis resolution, as EU institutional actors have sought to get beyond the rigidities of the initial crisis response to economic governance that established a set of numbers-targeting rules focused on austerity and structural reform that have not worked.  I will be considering how EU officials in different EU institutions may go about informally reinterpreting such rules as well as how they legitimate any such reinterpretations.

Interview in Corriere della Serra

While in Rome last week, I was interviewed by Lorenzo Salvia for Corriere della Serra. The interview appeared in the print version of the paper on November 26, 2013. [interview Schmidt corriere della sera 26 nov 2013]

Hollande’s Tax Rebels Underscore Mounting Opposition

Hollande is caught between a rock and a hard place.  The rock is the European Commission, which has been pushing him  to reduce deficits significantly.  Having been given a two year extension on the rules that demand a 3% deficit or lower, Hollande has to find the money.  The easiest way to do that, and the fastest, is to raise taxes.  That French taxes are high is not the main problem, despite the fact that they are the highest in the Euro-area.  Like the Scandinavian countries, French citizens get a lot for their money in terms of a high level of public services, including high quality day care and generous allowances for child-care, which have translated into France having one of the highest birth rates in the EU (alongside Sweden).  The problem is that with the economy slowing and unemployment high (esp. youth unemployment), ordinary citizens don’t want to hear of any tax increases, in particular because they see the rich leaving for across-the-border tax havens, such as Belgium, and government officials maintaining their perks.  The hard place, then, is the citizens.  It is all the harder for Hollande, given his popularity ratings, which are the lowest historically for any President of the Fifth Republic, and because he has failed to find a discourse that legitimates his adherence to Eurozone agreed austerity—remember that he pledged ‘growth’ in his presidential campaign—or a strategy that actually could deliver growth.

Link:

Hollande’s Tax Rebels Underscore Mounting Opposition by Gregory Viscusi and Mark Deen (Bloomberg 11/20/13)

 

Resilient Liberalism in Europe’s Political Economy Presentation of the book edited by Vivien Schmidt and Mark Thatcher

Vivien Schmidt and Mark Thatcher introduce Resilient Liberalism in Europe’s Political Economy at the University of Milan:

http://portalevideo.unimi.it/media?mid=333

See also comments by contributor Maurizio Ferrera:

http://portalevideo.unimi.it/media?mid=333&cid=1385&play=true

And by contributor Erik Jones:

http://portalevideo.unimi.it/media?mid=333&cid=1386&play=true

Why Are Neoliberal Ideas So Resilient?

Given the abject failure of the neo-liberal policy offer, why has it persisted as the dominant approach to European policymaking and is there any way out? Vivien Schmidt and Mark Thatcher address this question in an opinion piece for the online think-tank Policy Network. The piece builds on their argument in their co-edited book, Resilient Liberalism in Europe’s Political Economy.

Despite the economic crisis that hit the US and Europe full force in 2008, political leaders have made little attempt to rethink the neo-liberal ideas that are in large part responsible for the boom and bust, let alone to come to terms with how immoderate the ‘Great Moderation’ really was. Much the contrary, neo-liberal ideas continue to be the only ideas available.  In the financial markets, where the crisis began, reregulation remains woefully inadequate, while the only ideas in play are neo-liberal, either for more ‘market-enhancing’ regulation or in favor of greater laissez-faire. The biggest puzzle, however, is the response to the crisis by Eurozone countries that have embraced ‘market discipline’ through austerity and, in so doing, have condemned themselves to slow or no growth.   This is in contrast to the US, which has posted better economic results, despite being torn between Republican fundamentalists advocating austerity and a more pragmatic leadership focused on growth.

Our question, then, is:  How do we explain the resilience of neo-liberal economic ideas?

Continue reading at policy-network.net>>

 

ELIAMEP Crisis Observatory Interview

During a European Seminar entitled “Europe in Crisis, Citizens in Protest” (4-7 July, 2013, Nafplion, Greece), I gave a video recorded interview for the Crisis Observatory/ELIAMEP.

In it, I discuss why the Eurozone has not been able to exit the crisis and problems with current approaches to the crisis among other things. The interview was transcribed and can be read on line in English here.

Austerity Seen Easing With Change to EU Budget Policy?

Vivien Schmidt’s comment on Mathew Dalton’s September 19 Wall Street Journal article, “Austerity Seen Easing with Change to EU Budget Policy,” was picked up by AP reporter Juergen Baetz. Comment and links to both articles below.

Easing austerity through change to EU budget policy is a very significant move.  If agreed by EU finance officials, changing the calculation of the ‘structural deficit’ could go a long way to easing the economic problems—and thereby the political ones–of the Southern European countries as well as Ireland.  It is also a silent acknowledgement of the fact that the radical deficit cutting programs of the past three years have failed to address growth.  It may not be possible to reverse the financial stability rules and numerical targets of the various Eurozone pacts, but  it is possible to reinterpret them.  And by reinterpreting them, the worst aspects of those rules, the growth destroying aspects, may be set aside.  What we are seeing is the beginning of a process of re-evaluation of the economic policies that have kept growth down while increasing debt-to-GDP ratios, and thereby keeping the Eurozone from exiting the crisis.  It is about time.

Links:

Austerity Seen Easing With Change to EU Budget Policy – Change Would Have Big Impact on Spain, Significantly Reduce Estimates of Government’s ‘Structural Deficit’ by Mathew Dalton (Wall Street Journal 9/19/13)

EU to Change Budget Calculation to Ease Austerity by Juergen Baetz (Associated Press 9/19/13)

The Future of the Eurozone

I was a keynote speaker, along with Iain Begg, at a plenary on “The Future of the Eurozone” at the Sheffield Political Economy Research Institute annual conference Beyond Austerity vs Growth: The Future of the European Political Economy at the University of Sheffield on 1-3 July 2013.  Participants included leading academics, policy makers and journalists from across the globe. You can view a video of the session on YouTube. (My talk begins at 39:13minutes.)

 

Schmidt Publishes Resilient Liberalism in European Political Economy

Vivien Schmidt’s co-edited contribution to Cambridge University Press’s Contemporary European Politics series has been released in the UK and will be available in the US by the end of the month. The book – Resilient Liberalism in European Political Economy – explains why neoliberal economic ideas have not just survived, but thrived since the 1980s – taking Europe from boom to bust.

Abstract

Why have neo-liberal economic ideas been so resilient since the 1980s, despite major intellectual challenges, crippling financial and political crises, and failure to deliver on their promises? Why do they repeatedly return, not only to survive but to thrive? This groundbreaking book proposes five lines of analysis to explain the dynamics of both continuity and change in neo-liberal ideas: the flexibility of neo-liberalism’s core principles; the gaps between neo-liberal rhetoric and reality; the strength of neo-liberal discourse in debates; the power of interests in the strategic use of ideas; and the force of institutions in the embedding of neo-liberal ideas. The book’s highly distinguished group of authors shows how these possible explanations apply across the most important domains – fiscal policy, the role of the state, welfare and labour markets, regulation of competition and financial markets, management of the Euro, and corporate governance – in the European Union and across European countries.

About the editors

Vivien A. Schmidt is Jean Monnet Professor of European Integration and Professor of International Relations and Political Science at Boston University and Founding Director of Boston University’s Center for the Study of Europe.

Mark Thatcher is Professor in Comparative and International Politics in the Department of Government at the London School of Economics and Political Science.

About the series

Contemporary European Politics presents the latest scholarship on the most important subjects in European politics. The world’s leading scholars provide accessible, state-of-the-art surveys of the major issues which face Europe now and in the future. Examining Europe as a whole and taking a broad view of its politics, these volumes will appeal to scholars and to undergraduate and graduate students of politics and European studies.