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Über dieses Buch

This book sheds new light on if and why, between 2009 and 2015, European governments succeeded or failed in initiating and actually realizing some of the farthest-reaching austerity plans in modern history. The author analyzes the economic and political context and the underlying causes of austerity and economic adjustment packages during the Euro crisis. In doing so, he shows that austerity has its roots in an institutional mismatch between capitalist diversity in the Eurozone on the one hand, and an ill-conceived common economic regime on the other. In this context, austerity trumped politics, and even democracy itself. The book will appeal to scholars of political science and comparative political economy, as well as governmental policymakers and practitioners in the finance sector.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract
In this introductory chapter to his book, Guthmann uncovers two main empirical puzzles motivating his research. First, the observation that despite considerable cross-country heterogeneity and very different economic problems, virtually all Eurozone countries implemented the same response: austerity. Second, fiscal adjustment was much more widespread and sizable than one would have predicted, based on the extremely unfavorable politico-economic context. More importantly, the degree to which consolidations were actually achieved in this context, is no less than astonishing. This has been true in particular for peripheral Eurozone countries such as Greece, whose consolidation performance was often—and in light of the presented findings unfairly—portrayed in a negative light in the news media. From these empirical puzzles, Guthmann derives his main research questions, focusing on the determinants of the occurrence, the size, and the degree of realization of fiscal consolidations during the Euro crisis. He also briefly introduces his theoretical framework and main argument, according to which austerity is mainly rooted in countries’ politico-economic institutions.
Kai Guthmann

Chapter 2. Fiscal Adjustment in Europe

Abstract
In “Fiscal adjustment in Europe”, Guthmann provides a much-needed discussion of the concept of austerity and its operationalization. He addresses the strengths and weaknesses of earlier approaches found in the literature on fiscal consolidations (both historical/action-based as well as traditional outcome approaches), emphasizing mainly the problems that stem from neglecting context. Among others, in the study of fiscal adjustment policies and their outcomes, the public sector can rarely be treated in isolation of the private sector, and the availability of alternative policy options needs to be taken into account, modeled and measured correctly. Based on this discussion, Guthmann introduces his own novel conceptualization and empirical operationalization of austerity and its realization, which combines earlier approaches, drawing both from ex-ante fiscal plan data as well as ex-post outcomes of various fiscal and economic variables. Finally, he provides a great amount of empirical data not only on the initiation, size, and realization of fiscal consolidation in the Euro crisis, but also the entire politico-economic context of crisis-induced economic adjustment in Europe more generally.
Kai Guthmann

Chapter 3. Theoretical Framework: Austerity’s Institutional Origins

Abstract
In “Austerity’s Institutional Origins”, Guthmann develops a theoretical framework for understanding fiscal adjustment in the Euro crisis, which revolves around a politico-economic trilemma of the Eurozone defined by the three irreconcilable nods of national diversity, EMU, and democracy. Interdisciplinary in nature, this framework is embedded in literatures from both economics and political science, with roots in OCA theory, the literature on currency unions, the impossible trinity (trilemma) of international macroeconomics, in historical institutionalism, the comparative capitalism literature, and the globalization literature, among others. Guthmann makes an argument that builds on the assertion that the origins of fiscal consolidation in the crisis ultimately lie in an institutionally-determined misfit between the heterogeneous capitalist varieties bound together in the Eurozone on the one hand, and the common rules governing the union on the other. Under the umbrella of this economic regime, intra-EMU heterogeneity led to economic divergence and BoP-crisis. With alternative policy options severely constrained, macroeconomic imbalances were bound to be corrected by the most painful means possible: a policy program of austerity and internal devaluation, that comes with considerable economic, social, and political ramifications. The chapter concludes with a derivation of twelve hypotheses to structure the quantitative statistical analyses in the subsequent chapters.
Kai Guthmann

Chapter 4. Empirical Analyses: Intra-EMU Heterogeneity and Austerity

Abstract
In this first stage of the empirical analysis of austerity, Guthmann tests hypotheses on the determinants of intra-EMU macroeconomic imbalances, planned fiscal policy stances, the initiation and the size of austerity in a combination of descriptive statistics and more rigorous pooled TSCS (logistic) regression models. He convincingly shows that imbalances in the Eurozone do have institutional origins. Under common EMU rules, a country’s type of growth model becomes a strong institutional determinant of its net international investment position (NIIP). Export-led growth and its underlying politico-institutional fabric are clearly associated with intra-EMU creditor status and export surpluses vis-à-vis more demand-led systems in the currency union. With regard to the determinants of the initiation and ambition of fiscal consolidation plans and policies, empirical results are unambiguous, too. In post-crisis EMU, negative NIIPs not only lead to contractionary fiscal stances, but also increase the initiation probability of austerity plan, and make these plans more ambitious. The explanatory power of the relevant three-way-interaction term, used to model the context-specific effect of post-crisis intra-EMU imbalances, even outweighs that of more traditional models of fiscal adjustment based exclusively on standard economic explanatory variables.
Kai Guthmann

Chapter 5. Adjustment by Force: The Realization of Austerity

Abstract
In “Adjustment by Force”, Guthmann presents the second stage of his statistical analysis of austerity in the Euro crisis, by testing hypotheses on the determinants of the realization of fiscal consolidation plans. Plan realization is operationalized as the difference between planned and realized austerity, based on plans and outcomes of various fiscal variables. As the empirical results show, for post-crisis EMU countries, negative NIIPs tend to be associated with considerably better plan realization. Not surprisingly, unexpected developments, such as growth surprises or the urgent need to recapitalize failing banks, also have strong effects, but these can at least partly be considered endogenous to the main variable of interest. Political variables, in contrast, ceased to have an effect. The argument that democratic policymaking has been undermined in the demand-led crisis countries is thereby clearly supported by the data. Guthmann also shows that the acknowledgement of context is key in the operationalization of fiscal adjustment. When plan realization is examined based on nominal spending figures, as opposed to the more prominent percentage-of-GDP operationalization found in the literature, results did actually indicate a significant overachievement of consolidation plans for post-crisis EMU deficit countries—with Greece being a case in point.
Kai Guthmann

Chapter 6. Conclusion

Abstract
In the final chapter to his book, Guthmann summarizes his arguments and empirical findings on the institutional determinants of austerity in the Euro crisis; and discusses possible implications for academics and policy practitioners. He argues that context is key when it comes to understanding and analyzing fiscal and economic adjustment plans and their realization. This implies, among others, that the one-dimensional focus on public sector debt, found quite naturally in much of the fiscal consolidation literature, may be misguided at least when countries of the Eurozone are at the center of analysis. In essence, what European countries were facing after the Great Recession was not a sovereign debt crisis; and narrowly labeling it as such would confuse the symptom for the cause. In line with that, Guthmann emphasizes more generally the need to distinguish the sources from the causes of the phenomena to be explained, and to establish and analyze causal chains in their entirety. The stability of casual chains, after all, may be context-dependent, too. Guthmann concludes with a pessimistic and an optimistic outlook for the future of the Eurozone, with optimism counterintuitively being grounded in the expectation that irrational financial markets may very well re-establish credibility even for a technically unviable currency union.
Kai Guthmann

Backmatter

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