Credit Lending as Two-Level Game: Troika-Debtor Negotiations in the Eurozone
Final Report Abstract
The European financial and debt crisis has led to new patterns of coordination and cooperation between the International Monetary Fund (IMF), the European Commission (EC), the European Central Bank (ECB) and a number of European crisis countries. Four Eurozone countries (Greece, Ireland, Portugal and Cyprus) have been undergoing substantial Economic Adjustment Programs (EAPs) which tie the disbursement of IMF and EU loans to compliance with orthodox macroeconomic and structural program conditionalities. Overall, the lending conditions consist of financial sector consolidation, fiscal adjustment and structural reforms. The loan conditions are being negotiated in detail between the creditor group and the debtor government while the latter is expected to take “ownership” of the program in guaranteeing its smooth implementation. Our research project has analyzed the process of negotiation and implementation of these four lending programs by taking the interaction of the Troika institutions with the debtor government into account. In the first part of the project we have scrutinized the patterns of conflict and cooperation between the IMF, the EC and the ECB during the process of program design. The one-year extension of the project allowed us to shed light on the political and economic factors which determine the domestic implementation of loan conditionalities in the four Eurozone countries. By studying the implementation process through the lens of the “Two-level game” we hoped to broaden the literature with respect to three aspects: first, our initial research had confirmed that the “costs of no-agreement” is an important variable capturing the changing preferences of creditors and the borrower in regard to program measures during the sequence of a lending program. Second, drawing mostly on the veto player literature we planned to explore the impact of coalition partners, parliaments and the constitutional court in addition to government capacity and election cycles on the implementation process. Third, the strategies of the debtor government to mediate between the demands of the Troika and domestic opposition are equally important. Our analysis revealed that the four program countries displayed different degrees of implementation. While Ireland can be considered the “posterchild” of implementing adjustment programs, Greece can be labelled as a case of a substantially lower degree of implementation. Portugal and Cyprus both show moderate implementation records. Overall, the analysis confirms our basic assumption that the degree of either comprehensive or selective implementation depends largely on the interaction of international and national factors. In order to explain the degree of implementation, it is most convincing to especially consider the interplay of costs of non-agreement (=political and market pressures) with active veto players, and the coercive or cooperative strategies of the CoG to overcome veto player opposition. At this, important implications arise for the design of a program with respect to the sequencing and prioritization of reform measures.
Publications
- Accountants, Europeanists and Monetary Guardians: bureaucratic cultures and conflicts in IMF-EU lending programs, in: Review of International Political Economy, 26 (6), 1187-1210
Lütz, Susanne, Sven Hilgers and Sebastian Schneider
(See online at https://doi.org/10.1080/09692290.2019.1632916) - Games Borrower Governments Play: The Implementation of Adjustment Programmes in Cyprus and Portugal, in: West European Politics 42 (7), 1443-1463
Lütz, Susanne, Sven Hilgers and Sebastian Schneider
(See online at https://doi.org/10.1080/01402382.2019.1583482) - Troika Institutionen als Internationale Bürokratien. Der Einfluss inkongruenter Organisationskulturen auf Kreditkonditionalitäten, in: dms - der moderne staat 12 (1), 1-20
Lütz, Susanne, Sven Hilgers and Sebastian Schneider
(See online at https://doi.org/10.3224/dms.v12i1.02) - When Overlapping Organisations Play Two-Level Games: IMF–EU Interaction in Credit Lending to Latvia and Greece, in: New Political Economy 4 (3), 299-312
Lütz, Susanne and Sven Hilgers
(See online at https://doi.org/10.1080/13563467.2018.1443063) - When numbers don’t add up: Bureaucratic culture and conflicts in EU-IMF programs, in: Michele Chang, Federico Steinberg and Francisco Torres (Eds.), The Political Economy of Adjustment Throughout and Beyond the Eurozone Crisis: What Have We Learnt? Abingdon/London: Routledge, 38-57
Lütz, Susanne, Sven Hilgers and Sebastian Schneider
(See online at https://doi.org/10.4324/9780429426940-3) - Business and Monetary Policy, in: Aynsley Kellow, Tony Porter and Karsten Ronit (Eds.), Handbook Business and Public Policy. Cheltenham: Edward Elgar 2021, S. 175 - 190
Hilgers, Sven
