The crisis of the SPD: where now for Germany's social democrats?

Germany's social democrats suffered a disastrous result in the German federal elections, securing only 20.5 per cent of the vote: their worst result in the post-war period. Björn Bremer writes that the party will have a great deal of soul-searching to do over the next four years, and that the left-wing of the party is likely to try and reassert itself as it seeks to become a strong voice of opposition to the next government

Do Citizens Care About Government Debt? Evidence From Survey Experiments on Budgetary Priorities

Ever since the Great Recession, public debt has become politicized. Some research suggests that citizens are fiscally conservative, while other research shows that they punish governments for implementing fiscal consolidation. This begs the question of whether and how much citizens care about debt. We argue that debt is not a priority for citizens because reducing it involves spending and tax trade-offs. Using a split-sample experiment and a conjoint experiment in four European countries, we show that fiscal consolidation at the cost of spending cuts or taxes hikes is less popular than commonly assumed. Revenue-based consolidation is especially unpopular, but expenditure-based consolidation is also contested. Moreover, the public has clear fiscal policy priorities: People do not favor lower debt and taxes, but they support higher progressive taxes to pay for more government spending. The paper furthers our understanding of public opinion on fiscal policies and the likely political consequences of austerity

Lower taxes at all costs? Evidence from a survey experiment in four European countries

It is commonly argued that citizens favour lower taxes, thereby exerting pressure for tax reductions that undermine the ability of governments to raise revenues. We argue that the ostensibly strong support for lower taxes is the result of survey measures that fail to account for fiscal trade-offs. An original survey experiment conducted in Germany, Italy, Spain, and the United Kingdom reveals that support for lower taxes declines significantly when this comes into conflict with other fiscal policy objectives, such as government spending, public debt, or other taxes. Overall, regressive changes receive less support than progressive reforms. At the individual level, preferences are shaped by self-interest and ideology, with ideology exerting a predominant influence. Notably, left-leaning, high-income voters exhibit an even stronger inclination to resist tax reductions compared to their low-income counterparts. Our findings challenge the assumption that tax cuts enjoy widespread popularity and suggest the potential for a progressive coalition against tax cuts, encompassing both low-income and affluent left-wing individuals

Threats and solidarity in the Eurozone: how Italian and German citizens respond to information about Italexit

Previous research suggests a form of ‘democratic constraint’ blocks attempts to reform the euro. While voters in creditor countries oppose debt sharing across the Eurozone, voters in debtor countries are unwilling to push for change by threatening to leave the single currency. Drawing on a new study, Lucio Baccaro, Björn Bremer and Erik Neimanns claim this argument overlooks the fact citizens in debtor countries are receptive to information about the costs of remaining in the euro, and that citizens in creditor countries are concerned about the costs of a breakup

Opposition to austerity outweighs support for the euro in Italy

Could a new financial crisis, brought on by the Covid-19 pandemic, lead to Italy’s exit from the eurozone? Lucio Baccaro, Björn Bremer and Erik Neimanns present evidence from a new survey experiment on Italian attitudes toward a European bailout and exit from the euro. They find that a majority of voters would opt to stay ... Continue

Austerity from the left explaining the fiscal policies of social democratic parties in response to the Great Recession

Defence date: 15 March 2019Examining Board: Professor Hanspeter Kriesi, European University Institute (Supervisor); Professor Dorothee Bohle, European University Institute; Professor Herbert Kitschelt, Duke University; Professor Jonas Pontusson, University of GenevaAusterity has come to define the post-crisis European political economy as the predominant policy response to the Great Recession since 2010. After a brief period of “emergency Keynesianism” from 2008 to 2010, even social democratic parties abandoned plans for deficit-spending and accepted austerity as the dogma of the day. Most of the existing literature attempts to explain this outcome either by pressures from financial markets or by the influence of external institutions, for example the European Union or the International Monetary Fund. However, social democratic parties also accepted fiscal orthodoxy in countries where the pressures from financial markets and external institutions were weak or absent, and thus they are not a sufficient explanation to explain austerity from the left. This thesis instead shifts the focus towards the popular coalitions that underlie macroeconomic policy by examining the elite and the popular politics of austerity. It argues that social democratic parties had both electoral and ideational reasons to support orthodox fiscal policies during the crisis, as they were trapped by the legacy of the Third Way that they had embarked upon prior to the crisis. On the one hand, social democratic parties believed that there was a high public support for fiscal consolidation. Influenced by the differentiation of interests among their traditional constituencies, they attempted to increase their economic credibility in order appeal to centre-left voters from the expanded middle class. On the other hand, social democratic parties were influenced by mainstream economic ideas. They drew on New Keynesianism, endogenous growth theory, and the social investment paradigm, which had become popular among social democrats at the end of the 20th century, to legitimize their support for the “austerity settlement” during the Great Recession. This combination of electoral and ideational forces created powerful pressures for social democrats to support orthodox economic policies over Keynesian deficit-spending which many failed to resist. To make this argument, this thesis combines qualitative and quantitative methods and draws on a wide range of empirical evidence. Among others, it uses evidence from quantitative content analysis, survey experiments as well as insights from over 40 elite interviews with leading social democratic politicians and policy-makers in Germany and the UK. In this way, the thesis studies both the popular and the elite politics of austerity in Western Europe and provides a new account of social democratic austerity.Chapter 2 'Theoretical Framework' and parts of chapter 6 'The Fiscal Policies of the British Labour Party in Times of Crisis' and 7 'The Fiscal Policies of the German SPD in Times of Crisis' draw upon an earlier version published as an article published jointly with Sean McDaniel 'The ideational foundations of social democratic austerity in the context of the Great Recession' (2019) in the journal 'Socio-economic reviewChapter 3 'The Programmatic Response' of the PhD thesis draws upon an earlier version published as an article 'The missing left? : economic crisis and the programmatic response of social democratic parties in Europe' (2018) in the journal 'Party politics

The Evolution of Germany’s Net Foreign Asset Position

Available data suggest that, between 2006 and 2012, Germany may have suffered losses to the value of more than 20% of annual economic output on its net foreign assets. Were these presumed losses on German net foreign assets coincidental or can they be attributed to deeper causes? Over time, fluctuating asset valuations are nothing unusual, per se. Losses can quickly turn into profits and vice versa. In addition, the available data should be interpreted with some caution. However, this report also shows that there are lessons to be learned from the loss in value on foreign assets. First, losses have been for the most part in portfolio investments, whereas foreign direct investments by German firms (strategic equity investments) have shown reasonable valuation gains since 2006 by international comparison. At the same time, foreign investors have also seen profit on their direct investments in Germany. With hindsight, it might have been a better strategy for German entrepreneurs and investors to either increase domestic investment or make long-term investments abroad. Further, a comparison with investment behavior in the United States (US) suggests that the profitability of German foreign asset placement has been low. Both countries attract capital from abroad for fixed-interest bonds because both Germany and the US profit from the fact that investors see them as “safe havens” and must pay comparatively low interest rates on bonds. However, while companies and private individuals in the US have simultaneously invested abroad in bonds with high value return, this can generally not be said for German investors in recent years. Some of Germany’s net losses can even be attributed to foreign investors making valuation gains on their investments in Germany

Geduldig am Abgrund

Die EU-Mitgliedstaaten zögern weiter, eine wirklich europäische Antwort auf die Krise zu geben. Damit verspielen sie die derzeit breite öffentliche Zustimmung für europäischer Solidarität

The ideational foundations of social democratic austerity in the context of the great recession

The ‘austerity settlement’ has come to define the post-crisis European political economy. Since 2010, parties from across Europe’s political mainstream have implemented austerity and despite the apparent conflict with the interests of their traditional constituents, even social democratic parties have acquiesced to this settlement. However, within the existing literature ‘social democratic austerity’ is currently under-theorized as it is assumed to involve a rather straightforward adaptation of social democrats to neo- and/or ordoliberal ideas. Utilizing rich and original evidence from over 60 elite interviews with key social democratic stakeholders in France, Germany and the UK, this article contests this view. It demonstrates instead that a distinct set of ideas based on New Keynesianism, supply-side economics, and the social investment paradigm provide the ideational foundations for social democratic austerity post-crisis. Understanding this, it is argued, is critical in order to fully appreciate how and why austerity has become dominant in post-crisis Europe

More Growth through Higher Investment

While many countries in the euro area are deep in recession due to a debt and structural crisis, the German economy appears to have excelled compared to many other euro area countries. Unemployment has fallen to the lowest level since German reunification, economic output has grown by over eight percent since 2009, and public budgets have been consolidated, generating a surplus in 2012. But this is no cause for euphoria. On the contrary, if one looks at Germany's economic development from a more long-term perspective, we can see that the country is lagging behind in many areas compared to most EU member states and most euro area countries. Since 1999, the euro area countries have on average achieved more economic growth than Germany and this increase in competitiveness can be largely attributed to wage moderation rather than productivity growth. The rate of investment has been falling for a long time and is very low by international standards. The estimations in this study indicate that Germany has had an annual investment gap of three percent of GDP, on average, since 1999. This means that Germany needs to invest substantially more in order to reduce the investment backlog accumulated in recent years and also to ensure higher potential growth and prosperity in the long term