Capitalising on External Constraint: Six Things You Should Know About Eurozone Bailouts

Abstract

In the last decade, five Eurozone governments in economic difficulty received assistance from international lenders on condition that certain policies specified in the Memoranda of Understanding were implemented. What room of manoeuvre did the governments of these countries have? After conditionality, to what extent were governments willing and able to roll back changes imposed on them by the international lenders? Do we find variation across governments, and if so, why?
This paper addresses those questions, summarizing the main findings of our book (Moury et al. 2021) on constraints on national executives in the five bailed out countries of the Eurozone during and beyond the crisis (2008-2019). We show that, despite international market pressure and creditors’ conditionality, governments had some room for manoeuvre during a bail out and were able to advocate, resist, shape or roll back some of the policies demanded by external actors. Under certain circumstances, domestic actors were also able to exploit the constraint of conditionality to their own advantage. The paper additionally shows that after a bail-out programme governments could use their discretion to revert the measures which bring the greatest benefits at a lower cost.

Keywords: bail out, troika, Southern Europe, Ireland, conditionality, Eurozone crisis