European Union

By Nicola Nones (Munk School of Global Affairs & Public Policy at the University of Toronto) and Melle Scholten (Department of Public Administration at the University of Twente)

The Eurozone crisis and the subsequent implementation of austerity measures in various member states of the union was in many ways a watershed moment for contemporary populism. But how does austerity translate into changes in public opinion? Scholars of positive political economy typically point to the household finances of people as relevant explanations for their political preferences. Reasoning from this perspective, we argue austerity measures are likely to have negatively impacted public opinion on the euro specifically, which limited governments’ ability to respond in tailored ways to the economic crisis.

Austerity, which can be implemented as either budget cuts or tax increases, places great economic pressure on citizens. They might have to pay a larger proportion of their income to help close deficits, or they might lose public goods provisions that they value. Most people would like to avoid either scenario. Since austerity might have been avoided if a national currency had been devalued in international currency markets – something that is impossible within the Eurozone – public support for the euro, as distinct from support for European integration more generally, may falter when governments implement austerity.

This logic notwithstanding, it is difficult to disentangle the effect of austerity on public opinion from the effect of the economic crises that generally precede it. Some scholars have used experiments to address this problem, but that runs into a different issue. Asking people to imagine how they might respond to austerity is different from seeing them respond to its actual implementation. Instead, we rely on a subset of budget cuts and tax increases that were implemented unrelated to general economic malaise. We combine this with multiple waves of the Eurobarometer public opinion survey to construct a uniquely rich data set that captures individual opinions on the euro across time and Eurozone member states.

Leveraging this data, our JCMS article shows how austerity affects public support for the euro both in general and for specific groups in society. We make several contributions to the literature in doing so. First, we show that the public reacts about twice as negatively to budget cuts as they do to tax increases. Second, we find that the effect of austerity has a particularly pronounced effect for unemployed individuals, who are more vulnerable to austerity than others. Third and most interestingly, our results indicate that right-wing individuals have a stronger negative response to austerity in terms of their support for the euro than do left-wing individuals.

This latter finding is surprising, as it runs counter to the conventional wisdom that austerity – “having one’s books in order” – is a policy typically favoured by (neo-liberal) conservatives and opposed by progressives. We make sense of this finding in the context of support for the euro: having a supranational currency at all is opposed by the far-right, whereas the far-left opposes the neoliberal practice of Eurozone management, which could feasibly change. This perspective fits well with recent findings that euroscepticism has strengthened over time on the right as compared with the political left.

We make several smaller contributions in the paper on top of these core findings. For example, to see whether it is a reasonable assumption that people link austerity with the euro, we see what share of newspaper articles in the member states that mention austerity also mention monetary integration. For the period between 2002 and 2024, we find that this share runs between 18 and 27 per cent across the six member states for whom we could get data: Italy, Spain, France, Portugal, Ireland, and Germany. Given this high share, it doesn’t seem unreasonable to assume that the media plays an important part in informing the public about the economic consequences of Eurozone membership.

Also, contrary to earlier work but in line with recent insights, we find men and women react equally strongly to austerity. We furthermore find evidence suggesting that the effect is stronger in older member states than the Central and Eastern European states that acceded the Eurozone more recently. We also find that the anti-euro effect we uncover is a distinct response from general anti-EU sentiment that may arise during austerity, in line with our theoretical expectations based on the political economy of having a common currency. Finally, we show that the effect of austerity on support for the euro disappears during the Eurozone crisis, when policy uncertainty was high.

What should policymakers in Brussels and the member states take away from our work? First and foremost, it is important to recognize that the effects we uncover, while relevant, are substantively small. Even when faced with budget cuts, which show the largest effect on attitudes to the euro, people are only 4% less likely to support the euro. Some might see that as an indicator that Brussels could dictate budget discipline with little political consequence. Nevertheless, society should be aware that austerity is not a burden shared equally between all members of society: some are more vulnerable to its effects than others. Asking some groups in society to shoulder a greater part of the collective burden, especially when they are already relatively worse off economically, could result in political backlash.

Nicola Nones is a Postdoctoral Fellow at the Munk School of Global Affairs & Public Policy at the University of Toronto. His research interests include the economic role of media and leaders, and the political economy of finance.

Link: https://www.nicolanones.com/

 

 

Melle Scholten is a Lecturer at the Department of Public Administration at the University of Twente. His research interests include the political economy of labour and migration, and public opinion on globalization and migration.

Link: https://mellescholten.github.io/

 

The post Austerity and support for the euro appeared first on Ideas on Europe.

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