How the Euro
Divides the Union
The Effect of Economic Adjustment
on Support for Democracy in Europe
Data
26 Eurobarometer surveys from 2002-2014 in 28 EU member states,
based on four items:
 Satisfaction with the way democracy works in [country] / the EU
 Trust in the national parliament / in the EU
NLD LUX
75
50
25
EU Level
75
100
2013/2014
0
25
75
50
75
100
2013/2014
DNK
SWE
LUX
FIN
MLT
DEU NLD
AUT BEL
POL
GBR
IRL
EST
FRA
LVA
CZE
HUN
LTU
CYP
ESP ITA SVK ROU
PRT
BGR
GRC SVN HRV
0
25
100
50
50
75
75
25
SWE
FIN
MLT
DNK
AUT
LUX
DEU
NLD BEL
EST
HUN
GBR FRASVK
POL
IRL
LVA BGR
CYP PRT
HRV
LTU
GRC ITA CZE
ROU
ESP
SVN
100
0
25
50
75
50
0
100
DNK
FIN LUX
SWE
CYP
AUT NLD BEL
GRC ESP
DEU PRT MLTEST
GBR
ITA IRL
FRA SVK SVN
HUN
HRV
ROU
LVA CZE LTU
BGR POL
0
0
25
50
75
IRL
FIN
AUT SWE BELESP
GBR DEU
GRCCYP
CZE
FRA MLT EST
ITA SVN POL
PRT LVA
ROU
SVK HUN
BGR
LTU
HRV
National
Level
100
2006/2007
DNK
25
100
Trust
0
Our argument implies that by forcefully determining policy responses
in deficit countries, the Euro itself divides the peoples of Europe with
respect to their attitudes towards their democratic political system.
2006/2007
50
Internal devaluation leads to problems of democratic legitimacy:
 Internal devaluation policies are recessionary in the short-term
and imply considerable social costs
loss of output legitimacy
 Democracy is about choice, but the only option left for deficit
countries is internal devaluation
loss of input legitimacy
For their lack of democratic legitimacy, the economic adjustment
programs imposed on deficit countries result in an erosion of support
for democracy. We test the following hypothesis:
The stronger an internal devaluation imposed upon a country, the
larger is the increase in the share of detached citizens.
Satisfaction with Democracy
25
Argument & Hypothesis
The Euro-crisis can be interpreted as the outcome of institutionally
heterogeneous countries entering a currency union that was illequipped to prevent its members from diverging economically. More
crucially, in terms of crisis response, Eurozone membership limits
policy choices for the countries now struggling with balance-ofpayments deficits:
 External (exchange-rate) devaluation is not possible
 what remains is internal devaluation, i.e. reducing wages & prices
Support for Democracy: The Divide of Europe
Comparing citizens’ attitudes before and during the Euro-crisis, we
observe two patterns of change and stability:
 countries where democratic support remains more or less stable
 countries strongly affected by externally imposed economic
adjustment programs, where a majority of citizens becomes
‘detached’ from democracy (movement into lower-left quadrant)
0
Research Question
What are the consequences of economic adjustment programs
during the Euro-crisis for the attitudes of citizens towards their
democratic political system both at the national and European level?
Klaus Armingeon
Kai Guthmann
David Weisstanner
100
By cutting loose the Eurozone’s periphery from the rest of Europe in
terms of democratic legitimacy, the Euro has divided the union,
instead of uniting it as foreseen by its architects.
Analyzing Typical Cases: Greece and Latvia
Using the synthetic control method, we compare actual trends in
democratic support with counterfactual scenarios:
Methods
Descriptive analysis based on four attitude types (‘approving’,
‘nationalist’, ‘escapist’ and ‘detached’).
Time-series cross-sectional regression analysis. Dependent variable:
changes in the share of the ‘detached’ (i.e., negative orientations
towards both the national and the European level).
Synthetic control method to compare four typical cases: Latvia and
Sweden (non-Eurozone), Germany and Greece (Eurozone).
Results of the TSCS Regression Analysis
Rising detachment in the Eurozone’s periphery can to a considerable
degree be attributed to externally imposed economic adjustments:
Changes in unit labor
costs (proxy for internal
devaluation) have no
effect on detachment
outside the Eurozone,
but a large effect within
the Eurozone.
July 2015
Institute of Political Science
University of Bern
Fabrikstrasse 8
CH-3012 Bern
Prof. Dr. Klaus Armingeon
Professor
Chair of Comparative and
European Politics
[email protected]
Left graph: Actual detachment in Greece has grown to almost 50
percentage points higher than in a hypothetical country similar to
Greece, which pursued no internal devaluation.
Right graph: Detachment in Latvia did not rise as could have been
expected from the extent of internal devaluation pursued there
(synthetic Latvia). This can be explained by the fact that Latvia
voluntarily opted for those policies outside of the Eurozone, which
has preserved both input legitimacy and democratic support.
Kai Guthmann
Teaching and Research Assistant
Chair of Comparative and
European Politics
[email protected]
David Weisstanner
Teaching and Research Assistant
Chair of Comparative and
European Politics
[email protected]