Abstracts Political Science

Why comply? Experimental evidence on the European stability and growth pact’s incentives for member states

by Sarah-Esther Anneliese Willenbücher

The financial, economic and sovereign debt crisis in European Economic and Monetary Union (EMU) fundamentally challenged the purpose and functioning of the Stability and Growth Pact (SGP). Its purpose is to promote sustainable public finances to back the European Central Bank’s goal for monetary stability. The crisis made visible and exacerbated what had already started before the crisis: member states’ governments frequently breached the rules and ran high deficits, and many of these breaches remained without sanctions imposed by the other states in the Council. Given the high number of unsanctioned breaches, why would a member state comply at all? The literature’s accounts of a member state’s ‘decision’ for a breach of the rules (such as a lack of economic or political capacity, a bad economic situation, and political power in the Council) can only explain part of it. This thesis suggests ‘economic policy ideologies’ to be the complementary piece to explain compliance. The SGP was designed in an ordoliberal spirit, but governments’ convictions about what constitutes ‘good’ economic policy may run counter to it. To explore this idea, this thesis contributes to the academic debate by providing a different theoretical, empirical and methodological perspectives: 1) theoretical through considering the SGP as a mechanism to govern a common-pool resource and with economic policy ideology to endorse the rules as ‘appropriate’; 2) empirical through testing competing explanations to better understand how the SGP functions; and, 3) methodological through a novel type of a common-pool-resource experiment which I call ‘cultivation game’ to study the SGP, and which could also serve to study other cases of co-operation. The results show that economic policy ideologies shape compliance, in particular this is mediated through business cycle developments. This can inform ongoing debates about reforming the EMU’s institutional design.