To Pay or Not to Pay: Politics and the Political Economy of the European Debt Crisis

The debt crisis in Europe has turned a relationship between formally equal and interdependent member states of the European Union into a hierarchical one between creditor and debtor countries, and ushered in a new era of coercive governance especially for those countries that had to request emergency funds to cope with the fall-out from the crisis. Yet, there is a surprising variety in how debtor countries have adapted. Some countries have revolted against, while others have done their utmost to comply with the conditions imposed by the international creditors. A third group of countries falls in between these two extremes. The paper seeks to map the different responses to the debt crisis, and understand why countries revolt against or comply with international requirements. Four explorative case studies – Hungary and Latvia in Europe’s east, and Ireland and Greece in Europe’s west – will probe into the role of varieties of capitalism, public versus private debt, party systems and governmental legitimation strategies in explaining the different outcomes.