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

Author

Listed:
  • Sebastian Dellepiane

    (University of Strathclyde)

  • Niamh Hardiman

    (University College Dublin)

Abstract

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.

Suggested Citation

  • Sebastian Dellepiane & Niamh Hardiman, 2012. "The New Politics of Austerity: Fiscal Responses to the Economic Crisis in Ireland and Spain," Working Papers 201207, Geary Institute, University College Dublin.
  • Handle: RePEc:ucd:wpaper:201207
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    File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201207.pdf
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    References listed on IDEAS

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    1. Tim Callan & Brian Nolan & Claire Keane & John R. Walsh, 2010. "Inequality and the Crisis: The Distributional Impact of Tax Increases and Welfare and Public Sector Pay Cuts," The Economic and Social Review, Economic and Social Studies, vol. 41(4), pages 461-471.
    2. Carlos Mulas-Granados, 2003. "The Political and Economic Determinants of Budgetary Consolidation in Europe," European Political Economy Review, European Political Economy Infrastructure Consortium, vol. 1(Spring), pages 15-39.
    3. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters,in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122 National Bureau of Economic Research, Inc.
    4. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
    5. McGuinness, Seamus & Kelly, Elish & O'Connell, Philip J., 2010. "The Impact of Social Partnership on Ireland's Competitiveness," Papers RB2010/3/3, Economic and Social Research Institute (ESRI).
    6. Culpepper, Pepper D., 2008. "The Politics of Common Knowledge: Ideas and Institutional Change in Wage Bargaining," International Organization, Cambridge University Press, vol. 62(01), pages 1-33, January.
    7. Gros, Daniel, 2011. "External versus Domestic Debt in the Euro Crisis," CEPS Papers 5677, Centre for European Policy Studies.
    8. Perotti, Roberto, 1998. " The Political Economy of Fiscal Consolidations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 367-394, March.
    9. Sebastian Dellepiane & Niamh Hardiman, 2011. "Governing the Irish Economy: A Triple Crisis," Working Papers 201103, Geary Institute, University College Dublin.
    10. Alesina, Alberto Francesco & Perotti, Roberto & Tavares, Jose, 1998. "The Political Economy of Fiscal Adjustments," Scholarly Articles 12553724, Harvard University Department of Economics.
    11. Kevin H. O'Rourke, 2011. "A Tale of Two Trilemmas," The Institute for International Integration Studies Discussion Paper Series iiisdp364, IIIS.
    12. Sebastián Dellepiane-Avellaneda & Niamh Hardiman, 2009. "Explaining Variations in Patterns of Fiscal Consolidation," Working Papers 200928, Geary Institute, University College Dublin.
    13. Roche, William K., 2009. "Social Partnership - From Lemass to Cowen," The Economic and Social Review, Economic and Social Studies, vol. 40(2), pages 183-205.
    14. repec:cup:apsrev:v:100:y:2006:i:03:p:353-368_06 is not listed on IDEAS
    15. Alberto Alesina & Roberto Perotti & José Tavares, 1998. "The Political Economy of Fiscal Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 197-266.
    16. von Hagen, Jurgen & Strauch, Rolf R, 2001. "Fiscal Consolidations: Quality, Economic Conditions, and Success," Public Choice, Springer, vol. 109(3-4), pages 327-346, December.
    17. Alexander Plekhanov & Manmohan S. Kumar & Daniel Leigh, 2007. "Fiscal Adjustments; Determinants and Macroeconomic Consequences," IMF Working Papers 07/178, International Monetary Fund.
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    Citations

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    Cited by:

    1. Philip O’Connell, 2013. "Cautious adjustment in a context of economic collapse: The public sector in the Irish crises," Chapters,in: Public Sector Shock, chapter 9, pages 337-370 Edward Elgar Publishing.
    2. repec:eso:journl:v:47:y:2016:i:4:p:477-498 is not listed on IDEAS
    3. Niamh Hardiman & Muiris MacCarthaigh, 2013. "How Governments Retrench In Crisis: The Case of Ireland," Working Papers 201315, Geary Institute, University College Dublin.
    4. David M. Woodruff, 2014. "Governing by Panic: The Politics of the Eurozone Crisis," LEQS – LSE 'Europe in Question' Discussion Paper Series 81, European Institute, LSE.
    5. Niamh Hardiman, 2013. "Rethinking the political economy of fiscal consolidation in two recessions in Ireland," Working Papers 201316, Geary Institute, University College Dublin.
    6. Sebastian Dellepiane & Niamh Hardiman, 2012. "Fiscal Politics In Time: Pathways to Fiscal Consolidation, 1980-2012," Working Papers 201228, Geary Institute, University College Dublin.
    7. Niamh Hardiman & Spyros Blavoukos & Sebastian Dellepiane-Avellaneda & George Pagoulatos, 2016. "Austerity in the European periphery: the Irish experience," Working Papers 201604, Geary Institute, University College Dublin.
    8. Sebastian Dellepiane & Niamh Hardiman, 2013. "The politics of fiscal effort in Spain and Ireland: Market credibility versus political legitimacy," Working Papers 201321, Geary Institute, University College Dublin.
    9. David M. Woodruff, 2014. "Governing by Panic: The Politics of the Eurozone Crisis," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 1, London School of Economics / European Institute.

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    Keywords

    2008 banking crisis; regulatory failure; Ireland; principles based regulation; public debt;

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