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Mass Support for Financial Bailouts
Type
fundamental research project
Start Date
01 March 2014
End Date
28 February 2017
Status
ongoing
Keywords
Economic policy
financial crises
European Union
bailouts
public opinion
political behavior
Description
The global financial system is in the midst of its most severe crisis in the post-War era, with countries such as Greece, Portugal, Ireland, Spain and Italy facing possible sovereign defaults. To prevent an economic catastrophe, European leaders announced the creation of a bailout fund with a lending capacity of over €1 trillion. This fund was put in place primarily in order to invest in, and insure against sovereign debt. While the long-term impact of this agreement remains in question, most observers agree that further bailouts are needed if the European Union's embattled economies and those of its trading partners are to overcome this crisis.
The situation confronting the eurozone and the attempts to coordinate international transfers of such magnitude are an unprecedented phenomenon in the post-War era. The financial rescues face significant opposition in donor countries, where citizens remain reluctant to send taxpayers' money to finance the debts of other countries. Likewise, the bailouts have provoked even stronger opposition, including mass demonstrations and some violent protests, in some receiving countries, where citizens reject the austerity conditions imposed by the donor countries in exchange for loans from the bailout fund. A central question now confronting the eurozone is whether skeptical publics in donor and receiving countries will provide sufficient political backing to allow further bailouts. Since Switzerland heavily depends on trade with the EU, whether European countries will succeed in tackling the debt crisis will also have an important impact on the Swiss economy.
This proposed project will be the first large scale effort to identify the individual-level and policy-specific factors that affect mass opinion on the bailouts. We seek to evaluate the empirical validity of prominent explanations for the formation of public attitudes on the bailouts. To get at these issues empirically, we will field surveys in four countries central to the crisis (France, Greece, Portugal, and Spain) to produce novel data from which we can learn about the factors that shape individual support for financial rescues in both donor countries and recipient countries. In the second major part of the project we will examine the extent to which public support for a bailout program depends on its specific features, such as its size, the distribution of costs across participating countries, and the specific conditions imposed on the receiving country. To that end, we will employ a novel experimental approach we designed to estimate the sensitivity of voters' attitudes to specific bailout policy features. In sum, this project will offer the first systematic, multi-country analysis of the factors that shape mass opinion over the eurozone bailouts, arguably one the most important political-economic issues currently facing the global economy with far-reaching economic and political consequences for both eurozone countries and trading partners like Switzerland.
The situation confronting the eurozone and the attempts to coordinate international transfers of such magnitude are an unprecedented phenomenon in the post-War era. The financial rescues face significant opposition in donor countries, where citizens remain reluctant to send taxpayers' money to finance the debts of other countries. Likewise, the bailouts have provoked even stronger opposition, including mass demonstrations and some violent protests, in some receiving countries, where citizens reject the austerity conditions imposed by the donor countries in exchange for loans from the bailout fund. A central question now confronting the eurozone is whether skeptical publics in donor and receiving countries will provide sufficient political backing to allow further bailouts. Since Switzerland heavily depends on trade with the EU, whether European countries will succeed in tackling the debt crisis will also have an important impact on the Swiss economy.
This proposed project will be the first large scale effort to identify the individual-level and policy-specific factors that affect mass opinion on the bailouts. We seek to evaluate the empirical validity of prominent explanations for the formation of public attitudes on the bailouts. To get at these issues empirically, we will field surveys in four countries central to the crisis (France, Greece, Portugal, and Spain) to produce novel data from which we can learn about the factors that shape individual support for financial rescues in both donor countries and recipient countries. In the second major part of the project we will examine the extent to which public support for a bailout program depends on its specific features, such as its size, the distribution of costs across participating countries, and the specific conditions imposed on the receiving country. To that end, we will employ a novel experimental approach we designed to estimate the sensitivity of voters' attitudes to specific bailout policy features. In sum, this project will offer the first systematic, multi-country analysis of the factors that shape mass opinion over the eurozone bailouts, arguably one the most important political-economic issues currently facing the global economy with far-reaching economic and political consequences for both eurozone countries and trading partners like Switzerland.
Leader contributor(s)
Member contributor(s)
Hainmueller, Jens
Margalit, Yotam
Partner(s)
Stanford University, Columbia University
Funder(s)
Topic(s)
Comparative political economy
international political economy
public opinion
political behavior
international relations
Method(s)
surveys
experimental methods
Range
Institute/School
Range (De)
Institut/School
Principal
Swiss National Science Foundation
Division(s)
Eprints ID
222441
Reference Number
D10221501
2 results
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PublicationPreferences for International Redistribution: The Divide Over the Eurozone BailoutsWhy do voters agree to bear the costs of bailing out other countries? Despite the prominence of public opinion in the ongoing debate over the eurozone bailouts, voters' preferences on the topic are poorly understood. We conduct the first systematic analysis of this issue using observational and experimental survey data from Germany, the country shouldering the largest share of the EU's financial rescue fund. Testing a range of theoretical explanations, we find that individuals' own economic standing has limited explanatory power in accounting for their position on the bailouts. In contrast, social dispositions such as altruism and cosmopolitanism robustly correlate with support for the bailouts. The results indicate that the divide in public opinion over the bailouts is not drawn along distributive lines separating domestic winners and losers. Instead, the bailout debate is better understood as a foreign policy issue that pits economic nationalist sentiments versus greater cosmopolitan affinity and other-regarding concerns.Type: journal articleJournal: American Journal of Political ScienceVolume: 2014Issue: 58 (4)
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PublicationThe Ideological Basis of the Grexit Debate( 2015-11-14)
;Bansak, Kirk ;Hainmueller, JensMargalit, YotamWhat explains the sharp divide among European publics over the ``Grexit," that is, the possibility of allowing Greece to default and leave the Eurozone? Being part of a currency union can provide its member states with benefits, but when a member state faces default, maintaining the currency union can impose substantial redistributive costs on the other members, giving rise to disagreements over the desired policy response. We explore such an instance, examining the divisions underlying the Grexit debate using original survey data from four of the largest European economies. We contend that differences in economic self-interest among citizens, as well as the often-mentioned chasm between supporters of mainstream and extremist parties, provide little insight into the domestic divide over the Grexit. Instead, we argue that the key factor was the split between left and right. We lay out a set of theoretical explanations for the prominence of left-right ideology in structuring the public debate. Testing these arguments, we find that the primary mechanism was a systematic difference between left and right voters in expectations about the economic consequences of a Grexit for Europe as a whole, the outcome of which some perceive as the free market's dictate.Type: conference paper