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Bailout politics in Eurozone countries

Since 2010, five Eurozone governments in economic difficulty have received assistance from international lenders on condition that certain policies specified in the Memoranda of Understanding were implemented. How did negotiations take place in this context? What room for manoeuvre did the governments of these countries have? After conditionality, to what extent were governments willing and able to roll back changes imposed on them by the international lenders? Do we find variation across governments, and, if so, why?

This book addresses these questions. It explores the constraints on national executives in the five bailed out countries of the Eurozone during and beyond the crisis (2008–2019).

The book’s principal idea is that, despite international market pressure and creditors’ conditionality, governments had some room for manoeuvre during a bailout and were able to advocate, resist, shape or roll back some of the policies demanded by external actors. Under certain circumstances, domestic actors were also able to exploit the constraint of conditionality to their own advantage. The book additionally shows that after a bailout programme governments could use their discretion to reverse measures in order to attain the greatest benefits at a lower cost. It finally explores the determinants of bargaining leverage – and stresses the importance of credibility.

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Catherine Moury, Stella Ladi, Daniel Cardoso, and Angie Gago

alternating in power. Moreover, Greece was seen as the weakest link in the Eurozone because of its poor economic performance and structural problems, the roots of which preceded the crisis. However, the much discussed Grexit never occurred and the country rose from its ashes in August 2018. The Greek case allows us to demonstrate that governments have at least some room for manoeuvre during a bailout, even in the least likely case in which executives had very little bargaining power due to the country's economic vulnerability and very low levels of trust

in Capitalising on constraint
Six things you should know about Eurozone bailouts
Catherine Moury, Stella Ladi, Daniel Cardoso, and Angie Gago

the Parliament rejected a one-off ‘deposit levy’ on all deposits in Cyprus, the ECB announced the end of emergency lending to domestic banks. The deposit levy was eventually approved. Using the same strategy, the ECB exerted heavy pressure on Irish authorities to ask for a bailout, which they eventually did. The package of reforms and spending cuts adopted domestically failed to decrease the yields partly as a result of the delays in and/or lack of coordinated actions at the EU level at the onset of the crisis. Hence, one

in Capitalising on constraint
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Catherine Moury, Stella Ladi, Daniel Cardoso, and Angie Gago

Introduction Portugal is an interesting case to assess the room for manoeuvre of governments during a bailout and the factors influencing this leverage. In particular, it shows the importance of credibility and that, to some extent, elections do matter during a bailout. Indeed, Portugal experienced quite distinct government configurations in the period under study, and with different degrees of external credibility. This chapter is organised in six sections. We first look at the period just before the

in Capitalising on constraint
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Catherine Moury, Stella Ladi, Daniel Cardoso, and Angie Gago

Introduction Our last case study, Cyprus, is particularly interesting insofar as it is the only one where there was a bail-in rather than a bailout during the Eurozone crisis. By the time Cyprus entered the Adjustment Programme, the rescue mechanisms had already been well institutionalised. In fact, it was 2013 when Cyprus signed the Economic Adjustment Programme as a result of delays on the part of both Cyprus and the European partners. Cyprus successfully exited the programme three years later in March 2016. The Cypriot

in Capitalising on constraint
Angela Nagle

fell out of use after the dotcom bubble burst in 2000, as the outrageous hyperbole of the claims made for the term came to look absurd, today its central ideology is still with us. With the added rolling back of the state’s developmental role, the dotcom neoliberalism that Barbrook and Cameron called ‘the Californian Ideology’6 is perhaps more at work in Ireland now than ever. It has remained a consistent part of Ireland’s state ideology over successive governments. Before the bailout the government was rolling out plans for Ireland to become a ‘world-class knowledge

in Ireland under austerity
Costas Simitis

the future of the euro. The fear that the austerity measures in the various member states would have detrimental consequences for the prospects of growth across the Eurozone remained pronounced. In Greece, however, the bailout package exceeded expectations and this did create a climate of optimism. The Prime Minister asserted that ‘the country had been saved’. In the Cabinet meeting held on 2 May, at which the Memoran­ dum and its measures were discussed, he noted that ‘for the first time in very many years, the government is operating with the greatest devotion to

in The European debt crisis
The Irish left and the crisis
Michael Holmes

Introduction The Republic of Ireland was one of the countries worst hit by the global financial crisis and the ensuing Eurozone crisis. It was the first EU country to go into recession and the first to require a bailout, it was effectively under the control of the troika and endured austerity measures for several years. Even though the country officially emerged from bailout conditions at the end of 2013, and recorded the highest rate of growth among EU member states in subsequent years, the social costs still weighed

in The European left and the financial crisis
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Neoliberal gothic
Linnie Blake and Agnieszka Soltysik Monnet

. Clearly, the role of the State has shifted under neoliberalism from the provision of social welfare to the facilitation of global trade, this including the handover of billions of dollars of public funds in bank bailouts whenever the system that was ‘too big to fail’ teetered on the abyss (Seymour, 2014 : 13). Such bailouts were coupled with a programme of so-called ‘austerity’ measures that effectively forced the

in Neoliberal Gothic
Costas Simitis

accepted by Greece in order to ensure that it receives financing. The Troika also declares that it proposed and approved the Memorandum measures and that if they are not implemented it will not authorise payment of the loan. The Greek public has not the slightest doubt that the Troika is the ‘author’ and ‘owner’ of the bailout programme. That is why a continuation of the presence of the Troika after the payment of the last instalment in the year 2014 will provoke strong reactions. Domestically, this will be seen as the continuation of a ‘subjugation policy’. The Eurozone

in The European debt crisis