Defying the 'Juncker Curse': Can Reformist Governments Be Re-Elected?

40 Pages Posted: 20 Aug 2008

See all articles by Pietro Biroli

Pietro Biroli

University of Zurich - Department of Economics

Marco Buti

European Commission, DG II

Alessandro Turrini

European Commission; Centre for Economic Policy Research (CEPR)

Paul van den Noord

Organization for Economic Co-Operation and Development (OECD)

Date Written: June 2008

Abstract

European policy makers, notably in the euro area, seem to take for granted that the electorate will punish them for bold reform in product and labour markets. This may explain why progress in the euro area has been comparatively limited. This paper posits and, using a dataset for 21 OECD countries, shows that this fear of electoral backlashes is unfounded, provided that financial markets work well. The mechanisms involved are relatively straightforward: well functioning financial markets "bring forward" future yields of structural reform to the present, thus permitting to overcome possible short-run costs. As a result, the electorate tend to reward, not punish, reformist governments. This has important implications for the design of structural reform packages, with financial market reforms being an essential ingredient beside product and labour market reforms.

Keywords: Economic and Monetary Union, electoral cycle, financial markets, structural reforms

JEL Classification: E61, H30, H60, H70

Suggested Citation

Biroli, Pietro and Buti, Marco and Turrini, Alessandro and van den Noord, Paul, Defying the 'Juncker Curse': Can Reformist Governments Be Re-Elected? (June 2008). CEPR Discussion Paper No. DP6875. Available at SSRN: https://ssrn.com/abstract=1240185

Pietro Biroli (Contact Author)

University of Zurich - Department of Economics ( email )

Z├╝rich
Switzerland

Marco Buti

European Commission, DG II ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium
+32 2 296 2246 (Phone)
+32 2 299 3505 (Fax)

Alessandro Turrini

European Commission ( email )

Office BU-10/113
B-1049 Brussels
Belgium
+32 2 299 5072 (Phone)
+32 2 299 3505 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Paul Van den Noord

Organization for Economic Co-Operation and Development (OECD) ( email )

Economics Department (ECO)
2 rue Andre Pascal
75775 Paris Cedex 16
France

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