Covid-19 has triggered levels of fiscal activity in Europe not seen anymore since World War II and has reinforced the question of financial solidarity inside the EU, first thrown into sharp relief during the Euro-crisis (2009-2014). However, there are significant differences between EU-members in terms of their national preferences for the extent of financial solidarity and the conditions attached to it. In this paper, we explore the reasons for the formation of these ‘fiscal policy camps’. We find that traditional approaches based on political partisanship or geographical distributions (e.g. a frugal North vs a spending-spree South) offer little insight for explaining the positions of national governments on fiscal policy preferences. Instead we suggest that domestic political pressures – more precisely the extent to which incumbent governments are under pressure from Eurosceptic parties – is a central driver of a government’s preferences for fiscal policy in the EU. Finally, we reflect upon whether the coronacrisis may mean an end to the era of austerity politics that has had an ideational dominance over fiscal policies during the last two decades.
Talk by Prof. Kurt Huebner and Henrik Jacobsen
Date & Time: January 25, 2021 | 12:30pm – 1:30pm