The Limits of The Limits of Europeanization: explaining Europeanization: explaining

low reform capacity in low reform capacity in Greece?Greece?

[Work in Progress][Work in Progress]

Kevin FeatherstoneKevin Featherstone

LSELSE

Greece & EuropeanizationGreece & Europeanization

• ‘‘Europeanization’ is everywhere: Europeanization’ is everywhere: recent growth of studies of domestic recent growth of studies of domestic change attributed to change attributed to ‘Europeanization’. ‘Europeanization’.

• Risk of normative bias.Risk of normative bias.

• Looking at cause & too readily Looking at cause & too readily accepting the effect. Convincing accepting the effect. Convincing empirical evidence?empirical evidence?

Europeanization as the Europeanization as the frameframe• Such studies face major challenges in Such studies face major challenges in

establishing rigorous causal explanations: establishing rigorous causal explanations: identifyingidentifying– ‘‘linking mechanisms’ (Goetz, 2000) between linking mechanisms’ (Goetz, 2000) between

EU & domestic sphere; EU & domestic sphere; – key intervening variables (e.g. actors, key intervening variables (e.g. actors,

institutional capability, discourse, policy institutional capability, discourse, policy structure: Radaelli, 2003);structure: Radaelli, 2003);

– significance relative to other stimuli (external, significance relative to other stimuli (external, domestic).domestic).

– Non-deterministic outcomes.Non-deterministic outcomes.

Europeanization frustrated?Europeanization frustrated?

• Despite: Despite: – high public support for EU membership in high public support for EU membership in

Greece;Greece;– Declared commitments of successive Declared commitments of successive

governments for EU’s EMU; Lisbon 2000 Agenda governments for EU’s EMU; Lisbon 2000 Agenda & ‘modernisation’.& ‘modernisation’.

• Greece has been Greece has been one of the worstone of the worst in in implementing EU laws, adopting single implementing EU laws, adopting single market legislation & Lisbon reforms.market legislation & Lisbon reforms.

• Why? Why?

How to explain relative How to explain relative failure?failure?• Europeanization perspective helps to explain Europeanization perspective helps to explain

agenda & identify response, but there are agenda & identify response, but there are limits:limits:– Greece displays a paradox of capability: ‘integrated Greece displays a paradox of capability: ‘integrated

political leadership’ condition (a simple polity: political leadership’ condition (a simple polity: unitary; centralised; unicameral; majoritarian) unitary; centralised; unicameral; majoritarian) appears to be met, but ‘reform capacity’ is low.appears to be met, but ‘reform capacity’ is low.

– To explain non-adaptation, we should not start from To explain non-adaptation, we should not start from ‘Europe’: accounting for actor interests & ideas in ‘Europe’: accounting for actor interests & ideas in domestic setting requires other conceptual frames.domestic setting requires other conceptual frames.

• What are we What are we missingmissing in the domestic system to in the domestic system to deepen our explanation of low reform capacity?deepen our explanation of low reform capacity?

Structuring interests…Structuring interests…

• How does domestic ‘system’ How does domestic ‘system’ structure rational interests, structure rational interests, behaviour?behaviour?

• Modelling the domestic ‘system’: Modelling the domestic ‘system’: mode of mode of interest mediation (unions-interest mediation (unions-employers-government)employers-government); politics of ; politics of the the welfare regimewelfare regime; interests derived ; interests derived fromfrom economic model economic model. .

What model?What model? Interest Interest mediationmediation• UnionsUnions: ‘parentela pluralism’ (Pagoulatos, : ‘parentela pluralism’ (Pagoulatos,

2003): diverse but ‘rent-seeking’ behaviour 2003): diverse but ‘rent-seeking’ behaviour from state. ‘from state. ‘Disjointed corporatismDisjointed corporatism’ (Lavdas, ’ (Lavdas, 1997): corporatist structures lacking 1997): corporatist structures lacking compromise & trust, unable to sustain stable compromise & trust, unable to sustain stable pacts.pacts.

• Historically, ‘statism’ has structured Historically, ‘statism’ has structured expectations of each of the social partners expectations of each of the social partners (including the government) (including the government)

• ConflictualConflictual: e.g. tripartite social dialogue in : e.g. tripartite social dialogue in 1997, 2000 failed.1997, 2000 failed.

What model?What model? Welfare Welfare regimeregime• Mediterranean-typeMediterranean-type (Ferrera, 1996): highly (Ferrera, 1996): highly

fragmented provision. Peaks of generosity fragmented provision. Peaks of generosity (e.g. public sector pensions); lack of coverage (e.g. public sector pensions); lack of coverage (e.g. unemployment benefit). (e.g. unemployment benefit). Affects rational Affects rational interests: undermines labour mobilityinterests: undermines labour mobility..

• ‘‘Late-comers’ agenda (Pierson, 1998): Late-comers’ agenda (Pierson, 1998): provision still being created alongside provision still being created alongside defence of privileges: ‘immovable objects’ defence of privileges: ‘immovable objects’ versus agenda on equity. Powerful vetoes.versus agenda on equity. Powerful vetoes.

• High fiscal burden of pension privileges with High fiscal burden of pension privileges with social inequity – result of political interests, social inequity – result of political interests, as well as available resources.as well as available resources.

Politics of pensionsPolitics of pensions

• To some significant extent, technocratic To some significant extent, technocratic consensus on need for reform.consensus on need for reform.

• Yet, sub-optimal outcomes: slow, Yet, sub-optimal outcomes: slow, piecemeal.piecemeal.

• No ‘crafted’ social model to defend, bare No ‘crafted’ social model to defend, bare interests rather than social choice.interests rather than social choice.

• Actors defend interests in knowledge of Actors defend interests in knowledge of welfare gaps & vulnerabilities in provision, welfare gaps & vulnerabilities in provision, and expectations of reform weakness. and expectations of reform weakness. System encourages them to be ‘risk System encourages them to be ‘risk averse’ & ‘rent-seeking’.averse’ & ‘rent-seeking’.

What model What model : varieties of : varieties of capitalismcapitalism

• More ‘More ‘state capitaliststate capitalist’ (Schmidt, 2002) than ’ (Schmidt, 2002) than LMEs (UK), CMEs (Germany) (Hall & Soskice, LMEs (UK), CMEs (Germany) (Hall & Soskice, 2001), but state’s impact varies.2001), but state’s impact varies.

• Mixed Market EconomyMixed Market Economy (Molina & Rhodes, (Molina & Rhodes, 2005): more corporatist than in LMEs, but 2005): more corporatist than in LMEs, but more fragmented & less able to coordinate more fragmented & less able to coordinate than CMEs or deliver collective goods. than CMEs or deliver collective goods. – Lacks complementarity: low social protection, Lacks complementarity: low social protection,

high jobs protection. Strong domestic veto points, high jobs protection. Strong domestic veto points, low reform capacity. Prisoners’ dilemmas.low reform capacity. Prisoners’ dilemmas.

Modelling interests in the Modelling interests in the Greek economyGreek economy

• Company structureCompany structure: very few large : very few large enterprises and very many micro- and enterprises and very many micro- and small-firms small-firms

• Employment structureEmployment structure reflects late reflects late industrialisation: importance of industrialisation: importance of services; disproportionate size of services; disproportionate size of agriculture; relatively small agriculture; relatively small manufacturing sector;manufacturing sector;

• ParticipationParticipation: low participation of : low participation of women & part-time workers; significant women & part-time workers; significant problem of long-term unemployed.problem of long-term unemployed.

Services 65%; Agric12%

Female % one of lowest in OECD; part-time a third of

EU15 average

Self-employed % more than double EU15 av. Family workers

3x EU15

Structuring representation:Structuring representation:

• Business voice favours few large firms (SEV), rather Business voice favours few large firms (SEV), rather than myriad of very small enterprises . GSEVEE, not than myriad of very small enterprises . GSEVEE, not representative of small and medium size businesses in representative of small and medium size businesses in Greece. A fragmented coalition with no clear agenda. Greece. A fragmented coalition with no clear agenda. Thus a consensus emerges in the business community Thus a consensus emerges in the business community for a domestic market of anti-competitive regulation, for a domestic market of anti-competitive regulation, barriers to entry, relatively cheap labour & stable barriers to entry, relatively cheap labour & stable product demand.product demand. Business constituency for liberal Business constituency for liberal market measures is thus limited and shallow. market measures is thus limited and shallow.

• Union voices over-represent the public (and ‘wider’ Union voices over-represent the public (and ‘wider’ public) sector (GSEE, ADEDY), favouring the interests public) sector (GSEE, ADEDY), favouring the interests of a highly protected core group of workers, rather of a highly protected core group of workers, rather than temporary & irregular, informal workforce. than temporary & irregular, informal workforce. Prioritises rigidity over flexibility & irregularity.Prioritises rigidity over flexibility & irregularity.

Total Employers’

organisation density is

half that of EU15

average

Overall, union density is above

EU15 average, but unionisation in

private sector is low

Product market regulation 2nd most restrictive in EU15; worst in ‘ease of doing business’ (World

Bank).

Ratio labour cost/ hours almost half EU15

Split rationality & differential Split rationality & differential political voicepolitical voice• VoC: follow ‘median voter’. But where is the VoC: follow ‘median voter’. But where is the

median voter?median voter?• Split rationality & differential political voice Split rationality & differential political voice

(private sector versus public sector workers) (few (private sector versus public sector workers) (few large firms & myrid of small enterprises)large firms & myrid of small enterprises)

• Affects rational actor interests towards Affects rational actor interests towards privatisation; labour mobility & pensions.privatisation; labour mobility & pensions.

• A problem of governance: low reform capacity A problem of governance: low reform capacity from a set of structural conditions – distorted from a set of structural conditions – distorted representation, conflictual interests, skewed & representation, conflictual interests, skewed & limited public provision.limited public provision.

Bringing the State back in:Bringing the State back in:

1.1. A long-term statist tradition (a A long-term statist tradition (a ‘developmental state’) but its effectiveness ‘developmental state’) but its effectiveness and efficiency is comparatively low, and efficiency is comparatively low, undermining the capability to deliver public undermining the capability to deliver public goods.goods.

2.2. Perceived corruption and tax evasion is very Perceived corruption and tax evasion is very high, undermining competition and the high, undermining competition and the effective delivery of public services and effective delivery of public services and functions.functions. Large informal economy. Large informal economy.

3.3. State spending on social protection is State spending on social protection is relatively high, but skewed and this affects relatively high, but skewed and this affects actor rationality on welfare & employment.actor rationality on welfare & employment.

Govt sector cost highest in EU15; one of lowest in effectiveness

scores

Total Social Expend as % of GDP close to EU

median

2nd worst in EU in Global Corruption Index

Shadow economy (28% of GDP?) largest in EU15

Addressing the puzzle: Addressing the puzzle: modelling responsesmodelling responses

• There is a weak domestic constituency There is a weak domestic constituency for market and welfare reforms, with for market and welfare reforms, with the rational interests of key social the rational interests of key social actors defined by (a) the limitations of actors defined by (a) the limitations of current (welfare) provision and current (welfare) provision and compensating employment protection; compensating employment protection; (b) protected markets with stable (b) protected markets with stable product demand.product demand.

• Stop-go, incremental policy reform is Stop-go, incremental policy reform is the most likely outcome across such the most likely outcome across such sectors.sectors.

Limits of VoCLimits of VoC

• Not a simple problem of selfish unions & inertia Not a simple problem of selfish unions & inertia of few big firms (nor of party or personality).of few big firms (nor of party or personality).

• Wider systemic conditions need to be Wider systemic conditions need to be incorporated: e.g.incorporated: e.g.– Inefficiency, low resources of state administration: Inefficiency, low resources of state administration:

low implementational strength.low implementational strength.– Conflicting interests of clientelism: undermines will Conflicting interests of clientelism: undermines will

to reform.to reform.– Cultural factors: corruption, mistrust,non-Cultural factors: corruption, mistrust,non-

compliance.compliance.– Limited public space for debate on options.Limited public space for debate on options.

• Above consistent with Simitis, 2007.Above consistent with Simitis, 2007.

Reform deficit in a conducive Reform deficit in a conducive economic climateeconomic climate

• Period here is Period here is not not one of economic difficulty one of economic difficulty (with higher adaptational costs), but one of (with higher adaptational costs), but one of exceptional growth (with more scope for exceptional growth (with more scope for side payments);side payments);

• Thus: strength of opposition indicates (a) Thus: strength of opposition indicates (a) the embedded strength of the current the embedded strength of the current system; (b) the failure of new social forces system; (b) the failure of new social forces to emerge in the boom years; (c) failure of to emerge in the boom years; (c) failure of government to advance ideas to win government to advance ideas to win support from potential ‘winners’ & build a support from potential ‘winners’ & build a reform coalition.reform coalition.

Yet: Greek contrastsYet: Greek contrasts

• Capability: Greek Capability: Greek performance has variedperformance has varied between between sectors.sectors.

• Very good Very good macro-economic performancemacro-economic performance since 1996: since 1996: high GDP growth; convergence in inflation, deficit & high GDP growth; convergence in inflation, deficit & debt levels. Distinctive features here: external debt levels. Distinctive features here: external commitment device of EMU; relative autonomy & commitment device of EMU; relative autonomy & exclusivity of domestic policy management in this exclusivity of domestic policy management in this area.area.

• Contrast with problems in enacting ‘Contrast with problems in enacting ‘supply-sidesupply-side’ ’ reforms & welfare modernisation: weaker EU leverage; reforms & welfare modernisation: weaker EU leverage; a more open and diffuse domestic policy process.a more open and diffuse domestic policy process.

• Testifies to: Testifies to: nature of EU policy instrument (adoption-nature of EU policy instrument (adoption-implementation)implementation); how contrasting ; how contrasting domestic settings domestic settings structure actor access & interestsstructure actor access & interests..

So: limits to So: limits to EuropeanizationEuropeanization• For GreeceFor Greece, domestically, , domestically, a systemic problem of a systemic problem of

governancegovernance. Low reform capacity from both state . Low reform capacity from both state weakness & structure of interest mediation.weakness & structure of interest mediation.

• For EUFor EU: issues of its : issues of its ability to coordinate a ability to coordinate a programmeprogramme of economic & social reform – of economic & social reform – weakness of Lisbon process in face of domestic weakness of Lisbon process in face of domestic opposition. Capability-expectations gap?opposition. Capability-expectations gap?

• ConceptuallyConceptually: ‘Europeanization’ & ‘VoC’ approaches : ‘Europeanization’ & ‘VoC’ approaches need not be incompatible. need not be incompatible. One extends limits of One extends limits of the otherthe other. Delve deeper into structures of rational . Delve deeper into structures of rational interest, vetoes to explain EU effects & domestic interest, vetoes to explain EU effects & domestic response; contrasting Greek sectoral performance.response; contrasting Greek sectoral performance.