Governance and Crisis in the EU:
Stateness trumps Europeanization?
Kostas A. Lavdas
Professor of Political Science and Director, KEPET, University of Crete
lavdask@uoc.gr
klavdas@alum.mit.edu
GOSEM – 2 September 2013 – Draft
I. In lieu of an Introduction

Familiar approaches: neo-functionalism,
federalism, liberal intergovernmentalism (IG),
multilevel governance, new institutionalism,
constructivism
Taken for granted: some form of IG is crucial at
junctures of EC/EU development
 Different sets of actors playing different roles
during ‘routine politics’ and ‘emergency politics’


Today’s problem: ‘emergency politics’ extended
over an unusually long period of time
Neo-Functional- FEDERALISM
ism
Mechanisms

Political features
End state – telos?
Spill-over / elite
socialization /
interest groups at
EU level
Security
community/
political community
Federalizing
process /
constitutionalism
Separation of
powers (e.g.,
Council of
Ministers becomes
Upper House…)
Open-ended within A form of a
a security
federal-type union
community
framework
MULTILEVEL

LIB IG
Mechanisms
Policy-making in
Logic of diversity/
networks at several main mechanism:
tiers of authority/ two-level games
multiple levels
Political features
Several tiers of
authority / fluidity
between tiers /
authority becoming
more dispersed
Package deals /
negotiating based
on state
preferences
End state – telos?
A form of multilevel governance
Open-ended
Three sets of challenges

I. ‘emergency politics’ extended over an
unusually long period of time
 II. the role of
stateness in the EU
 III. the implications of the financial crisis for
the institutional operation of the EU and the
prevailing norms and rules of the game
 The
remainder of this presentation will
tackle these issues…
II. Stateness as a conceptual variable
Stateness involves a combination of the coercive
capacity and infrastructural power of the state with a
degree of identification on the part of the citizenry with
the idea of the state that encompasses them territorially
(Nettl)
 Scope/ extent, plus Strength/ power–effectiveness:
I CAPACITIES
 Degree of collusion, Formation of policy goals:
II AUTONOMIZATION
 Identification, rights/duties, expectations, efficacy /
gaps:
III POLIICAL OBLIGATION

Table 3: Dimensions of stateness:
capacities / autonomization
Low capacities
Developing
capacities
Collusion with
actors / minimum
institutionalization
of state autonomy
Asymmetrical
development /
partial – selective
autonomy
Variations on the
patrimonial state
model
Exogenous
(imported)
institutions
(GR 1)
Historic forms of
communist regimes
Converging from
paths of incomplete
pluralism
(GR 2)
Converging from
paths of
bureaucratic
authoritarianism
Converging from
paths of segmented
pluralist
Pursuit of societal
goals / strategies
through state policy
Maximum capacities Historic forms of
Scope + Strength
authoritarian
(Fukuyama)
corporatism
Maximum
autonomy
vis-à-vis
interests/networks
?
---
Approaches to the implications of EC/EU
membership for stateness:
 I. ‘European rescue of the nation-state’ (Milward)
 II. Stateness in transformation through the
‘pooling of sovereignty’ (mainstream consensus)
 III. Asymmetrical transformations of stateness
and an EU-embedded sovereignty (vide the
diverse changes in the three dimensions of
stateness: capacities, autonomy from interests,
securing obligation by citizens)

III. Europeanization and stateness
before 2008



Europeanization is an interactive political, institutional
and cultural process.
A host of diverse processes which concern adaptation,
adjustment, impact, interactions and feedback,
beginning in anticipation of membership and expanding
to more synchronized developments during later stages
of full membership.
A three- way process: (a) uploading preferences, (b)
impact (of EU on national level) and ( c) interactions
(between levels) and feedback
Governments of member-states ‘upload’ their
policies – whenever possible to reach
agreements – to the European level, then use
that level as a point of reference in order to
minimize the costs in ‘downloading’ them at
the domestic level.
 The ‘impact’ (of the EU on the national level) is
conditioned by preferences AND capacities
AND interests AND circumstances, irrespective
of the source of such policies (even if ‘uploaded’
by same states)

IV. A brief case study: Greece
Since the 1980s, full membership in the EC/EU
has offered Greece the possibility to form a new
strategic sense of direction as well as burdening the
country with testing challenges.
 As a result of rapid change, very real
opportunities, and increasingly complex
challenges, set against a background of inherited
institutions and practices that were ill equipped
to cope, Greece found itself at a prolonged
juncture of stateness

Successive Greek governments approached the
EC / EU as a mechanism for extracting /
securing resources in order to
 ( a) achieve domestic pacification (especially in the
agricultural sector but also in troubled urban and
semi-urban areas),
 ( b) serve the party-political and patronage-related
needs of the political elites, and
 ( c) amplify Greece’s voice in foreign policy objectives and
entanglements (Med, Turkey, Cyprus)

No serious attempt to embark on a strategic
effort to change the stateness paradigm through
sustained purposeful action (modernize the
bureaucracy, increase extracting capacities,
introduce and implement new public
management, etc)
 No serious attempt to embark on a strategic
effort to modernize the political economy (apart
from reactive moves - responses to the most
direct and unavoidable challenges, e.g., to the
banking sector) – no proactive approach




Privatization represented a far-reaching change in the
post-war statist policy paradigm. The choice for
privatization resulted from stimuli and pressures
associated with Europeanization.
Privatization was most successful in the banking sector,
with important broader implications for the entire
economy. On balance, however, the limits of
Europeanization before the sovereign debt crisis and its
implications were considerable.
In the years prior to the imposition of a new
compliance regime by the EU – ECB – IMF, the Greek
government’s ability to pursue its reform objectives was
more constrained by entrenched interests at home than
market pressures from the EU



After 2002, with the euro, Greece enjoyed a boom
based on cheap credit, because the bond markets no
longer worried about high inflation or a devalued
currency, which allowed it to finance large currentaccount deficits. Leading to a huge €350 billion public
debt, half of it to foreign banks. There is a deeper,
longer-term negative dimension:
Both the transfers from the EU (since 1981) and the
borrowed sums went mostly to finance consumption,
not to saving, investment, infrastructure,
modernization, or institutional development.
Hence neither the domestic economy nor the prevalent
form of stateness benefited from the transfer of funds.
Today,




Five years of unbroken recession, the end of rescue
package coming in 2013: finance ministry says about
€4.5bn will be needed in 2014 and another €5bn in
2015 – small compared to the package but will the EU
shoulder the new loans?
some form of debt relief will have to be discussed
between the German elections (September, 22) and
elections to the EP (May, 25) – but Greece will hold the
presidency
Social implications of the crisis: severe
Military / defence implications: severe
“Creative destruction”? Unclear yet, some
positive signs: (a) exports on the increase, (b)
forming a primary surplus.
 While Greece’s Europeanization has been an
impressively persistent project, the extent to
which future generations will approach it as a
tenacious project or as an obstinate one (i.e., a
project focused on a narrow-minded elite
strategy bordering on self-deception) will
depend on complex interactions between
domestic and EU-level developments – a
combination that’s difficult to predict.

Even assuming the need for the rescue packages,
the implementation was typical of Greece’s
stateness characteristics:
 massive deflation but – initially at least – no
structural reform, no effective tax reform,
revenue collection lagging behind due to
inability to tackle the shadow economy,
extremely slow pace of privatizations
 Again, major shifts in the stateness paradigm did
not occur as a result of strategic action


In 2010, when the EU – ECB – IMF lending
began, Greece’s stateness was still conceivable in
terms of the embedded sovereignty exercised in
the context of the EU, i.e., in the context of
what the German Constitutional Court famously
declared to be a ‘Staatenverbund’ (a compound of
States, 1993 ruling on the Maastricht Treaty): ‘If a
community of States assumes sovereign responsibilities and
thereby exercises sovereign powers, the peoples of the Member
States must legitimate this process through their national
parliaments’

How to approach stateness in Greece, Portugal, Spain
or Ireland since 2010-2011?
In Portugal, Ireland, Italy, Spain and Greece from last
year, the year-to-year reductions in the deficitto-GDP ratio have been unusually large and the
resulting contractionary effects unusually severe,
deepening the recession and increasing
unemployment
 Despite the popular protests and frequent
governmental crises, the recent and projected
deficit-to-gross domestic product ratios of those
countries continue, without exception, on their
downward-sloping trajectories toward the target
of 3 per cent.


After five years to deep recession, Spanish conditions are ugly
in some respects, somewhat encouraging in others (exports); yet
austerity policies started a mass emigration last year and will
continue to boost debt ever higher. Despite export performance,
weak growth will contribute to lead to economic and political
challenges.

In Portugal, the recession will continue until 2014, and the
unemployment rate will remain close to 20 percent. In July, the
resignation of two ministers led to a new cabinet. There is talk of
greater flexibility in austerity measures that would soften the
contraction impact.

In Greece, the contraction was 6.4 percent of the GDP in 2012
and will remain at 5 percent in 2013. The country will be in
recession well over the mid-2010s, despite additional funding by
Brussels. Unemployment close to 26 percent.

Europe needs a short-term fiscal stimulus. There are
only two ways to provide that stimulus: by allowing the
countries in deep and protracted contractions and
depression-level unemployment to suspend for the time
being their pursuit of the 3 per cent target; and by
inducing the countries – like Germany – that now have
deficits under 3 per cent of GDP to undertake a fiscal
stimulus that will boost domestic demand

If it doesn’t happen, the eurozone will remain
trapped in perpetual economic stagnation,
frequent recessions and double-digit
unemployment.
Risking the ‘failing state’ syndrome

In political science, the concept has been used to
denote a state which is unable to maintain internal
security and a degree of political order. Some (Chauvet
and Collier 2008) give the term an economic meaning:
“a failing state is a low-income country in which
economic policies, institutions and governance are so
poor that growth is highly unlikely. The state is failing
its citizens because even if there is peace they are stuck
in poverty.” The concept has been used in IR literature
and debates to denote collapsed and/or severely
incompetent regimes that need to be “fixed” by way of
external assistance and/or the formation of transitional,
shared sovereignty (Krasner 2004).
Differences between a ‘failed state’ and a ‘failing
state’
 Could an EU member state with protracted
failures in economic management and political
efficacy be considered a ‘failing state’?
 It will partly depend on the evolution of EU
governance and the future of federal-type
features (Michigan – today – or California – a
few years ago – would not qualify as ‘failing
states’)

IV. The crisis: lessons & issues


The obvious: a monetary union is a permanent mess
absent a degree of economic governance and polity-like
predictability. Beyond that, six (6) issues (see Lavdas,
Litsas & Skiadas and bibliography therein):
1) New precedents have been set with regard to the
management of debt crises in the Eurozone, entailing
the provision of IMF and European financial
assistance, in combination with austerity and structural
reforms. The template includes also bondholders being
asked to participate in debt restructuring proceedings,
with the possibility of incurring losses to their
investments.

2) The exposure of the European banking system to
the countries in crisis (Greece, Portugal, Ireland,
Spain) caused serious concerns: it was thought
that the crisis would be transmitted to the
European financial sector, thus necessitating the
conduction of “stress tests”, examining the
capacity of the banks to absorb losses on
distressed Eurozone bonds. The results were
encouraging but the stringency of the tests has
been questioned. Next: Banking union?

3) The bilateral loans provided by some of the
Eurozone members to other members, as well as
their participation in establishing the
EFSF/ESM mechanism, caused increased
financial liabilities for these states, as they have
to meet their own debt problems, leading to a
more careful treatment for these states in the
international capital markets.

4) The crisis in the eurozone demonstrated the
constraints imposed on members of a single currency area
(i.e., the lack of authority to devaluate currency
in order to boost exports and support growth
generating activities), while, at the same time, it
helped highlighting the fact that the denomination
of the debt burden in a “hard” single currency prevents
the increase of the debt’s values, if the use of another,
devaluated “national currency” was allowed.

5) The entire scheme of EU economic
governance was re-examined with a view to
improve the effectiveness of the Stability and
Growth Pact in terms of enforcement, by introducing
greater surveillance of national budgets by the
European Commission, and establishing an early
warning mechanism that would prevent or
correct macroeconomic imbalances within and
between member states. The IMF became the
external ‘enforcer’, but in the future?

6) The crisis in the eurozone has highlighted the
limits of the EU integration process, as it revealed the
fundamental disagreements between member
states about how much EU integration is
desirable, as well as the fact that certain member
states still place their national interests above the
‘common interest’ in the EU. These limits have
been countered (?) by the increase of formal and
substantive authority of the European Central
Bank as well as the creation of a permanent
European lending facility.
V. Now what? The norms that foster EU
governance as a longer-term project in the
making


In IR, notions of reciprocity (returning good behaviour
for good behaviour and bad for bad) are considered
crucial for stabilizing cooperation by making noncooperative behaviour unprofitable
The issue of the temporal horizon of cooperation: if it’s
there (due to a historic background) how to secure its
prevalence?

Two basic patterns of reciprocity:
*Specific reciprocity occurs when exchanges are seen as
comparable in value and occur in strict sequence [in
specific reciprocity, both actors in a relationship insist
that the value of their concessions must be equivalent
and that each must be made highly conditional on the
other]
* Diffuse reciprocity occurs when the actors consider both
the value and timing of individual concessions to be
irrelevant [main consideration: the long-term horizon of
cooperation]

BUT as Joseph Lepgold and others have suggested, there is
evidence of stable, cooperative interaction in which exchanges fit
neither of these patterns.

Mixed patterns of reciprocal cooperation: we can identify
four distinct patterns of reciprocity in terms of the two basic
dimensions of social exchange on which it is based: contingency
and equivalence.
 Contingency refers to the sequence and timing of an action taken
by one actor in response to an action taken by another. A highly
contingent action is one which is only taken in response to an
action by another, and is taken fairly quickly thereafter
 Equivalence refers to a comparison of the perceived values of
goods given and received. Theories of social exchange suggest
that the value of any particular good is issue-, context-, and
actor-specific and is not inherent to the good itself (rather than
being a function of some objective value of the goods
themselves, equivalence depends on how the exchange is
subjectively evaluated)
Patterns of reciprocity

PATTERNS OF
RECIPROCITY:
Specific:
Contingency / Equivalence:

In strict sequence /
Narrow equivalence

Diffuse:

Long-term /
Broadly conceived
equivalence

Mixed:


Mixed:

In strict sequence /
Broadly conceived
equivalence
Long term /
Narrow equivalence
Table 4. EU actors’ expectations in four strategic contexts
(adapted from Lepgold and Shambaugh 2002).
CONTINGENCY-
IMMEDIATE
LESS IMMEDIATE
Precise
Cell 1
Specific reciprocity:
narrow exchange (perceived
as equivalent in value) in
strict sequence
Cell 2
Mixed:
narrow, longer-term
exchange
Imprecise
Cell 4
Mixed:
broad exchange in strict
sequence
Cell 3
Diffuse reciprocity: broad
(perceived as non equivalent
in value) and longer-term
exchange
Equivalence

Cells 1 and 3 refer to the familiar cases of ‘specific’ vs. ‘diffuse’ reciprocity:

Specific reciprocity occurs when exchanges are seen as
comparable in value and occur in strict sequence. In other words,
in specific reciprocity, both actors in a relationship insist that the
value of their concessions must be equivalent and that each must
be made highly conditional on the other.
The polar opposite pattern (diffuse reciprocity) is one in which
the actors consider both the value and timing of individual
concessions to be irrelevant. Exchanges in this pattern are not
expected to be strictly comparable in value or linked closely in
time. Emphasis on the long-term horizon of cooperation.
How do norms of intense cooperation form in today’s EU? And
how does today’s EU (with its familiar projection of ‘soft power’
and ‘magnet quality’ capacities) influence international norms?




In EU politics, at early points in cooperation, both actors
demand strict contingency and precise equivalence from the
other. As the horizon of cooperation expands, other modalities
gain in weight, linked to diffuse and mixed models of reciprocity.
The main hypothesis is that the concepts used (such as
subsidiarity, codecision, and so on) depend on how actors
interpret (and then respond to) others’ policy moves and policy
concessions.
Specific reciprocity (Robert Axelrod’s ‘tit-for-tat’ games) after
the late 1940s can help explain the absence of violent conflict in
European IR. Yet the institutionalization processes associated
with the EC/EU can only be explained with reference to a
combination of (a) strategic action aimed at expanding
cooperation, (b) the prevalence of diffuse and mixed reciprocity
games, and (c) an encouraging international environment. Not all
games are linked to diffuse reciprocity; some correspond to the
mixed types suggested by Lepgold and Shambaugh. Indeed,
games linked to partially unbalanced relationships constitute
much that is worthy of examination in today’s EU politics
Theorizing reciprocity in regional contexts




The types of reciprocity can help explain the different ways in
which political theory establishes the relationship between the
domestic and the international.
In the Westphalian era, the clear distinction predominates,
whereby the traditions of justice and the good life are considered
to be relevant at the domestic level of analysis. The international
level can at best accommodate specific reciprocity.
Yet this is a process, uncertain and fragile, in which shifting
modes of reciprocity may encourage or discourage further
coexistence and cooperation.
The stability or instability of reciprocity norms will decide the
next steps. It is not accurate that all democracies refrain from
fighting amongst themselves. It has been demonstrated that
emerging democracies with unstable political institutions often
associate themselves with both domestic and international
violence and conflict.
VI. Transition towards what?

Recent evidence from the Eurobarometer indicates that
we may be going through a transitory phase. The
outcome may depend on a combination of particular
policy choices in hard times and the prevalence of a
longer-term horizon of cooperation as a priority

Perversely, the EU’s demographic trends (an
ageing population) may be considered helpful in
this respect, absent a conscious, deliberative
reinforcement of the idea of European
integration being grounded on the quest for
peace.


Eurobarometer data indicate that the public in
member-states that benefited from transfers
(structural funds etc) tended to express its trust to
the EU with percentages well above the ones for the
national government – a feature that dropped only after
2010 (see analysis in Lavdas & Mendrinou 2012).
This decline, as the EU average demonstrates, is
indicative of a more widespread tendency that appears
in the data of ‘contributing’ member states as well. It is
in fact even more marked as a tendency in the old and
older member states, such as France, Germany, but also
Portugal, Greece, and Spain.


These findings suggest less a tendency towards political
cynicism than an increase in skepticism among the EU
publics. The importance of this distinction cannot be
overestimated: the emergence of skepticism is closely
linked to questions of trust and accountability, not
apathy and alienation.
While cynicism tends to imply alienation vis-à-vis the
institutions and/or arrangements concerned, skepticism
tends to reflect various forms of criticism on the part of
public vis-à-vis the institutions and/or arrangements,
and may also involve issues of accountability which
may relate to criticism of a pattern or, in some cases,
the experience of failed expectations.
The increase in skepticism indicates also the
questioning of particular practices, the lack of
swift and decisive response by EU institutions,
and the prevalence of features that may prove
transitory,
 Depending of further policies and on the
existence of a strategic coherence that may help
interpret these policies for EU citizens

VIII. Stateness and EU Governance:
three scenarios

The first scenario (a rather depressing one):
the good old ‘Italian model’ (extensive fragmentation of
the party system, prevalence of a multitude of
particularistic linkages, balkanization of the state, limited
capacity to institutionalize politics and a resulting anomic
division of political labour) may be coming back with a
vengeance. At EU level, this means a prolonged period of
stalled ‘transition’ while ‘multilevel governance’ survives as
a framework for the interplay of the most powerful
networks with minimal accountability.


The second scenario: a federal-type system
emerging in the EU, coupled with an evolving system
of federal economic governance. An EU Consensus,
gradually replacing the Washington Consensus?
Requires an emerging European polity, albeit a
composite one. Securing the long-term horizon of
interactions appears to be the decisive way for the
continuing and expanding predominance of games of
mixed and diffuse reciprocity. It will have to come
about as a result of a greater synchronicity of national
and EU-level developments.
The third scenario represents the retreat to the state.
It signifies a particular type of a juncture of stateness
leading to the reinvigoration of a host of inherited state
attributes and modified capacities.
At present, an emerging pattern of asymmetric
developments suggest that stateness undergoes changes in
different ways within the EU; it undergoes changes
depending on inherited national structures and capacities,
fiscal and financial situation, and political imbalances at
EU level. In states like Greece, regression to direct
national political control of monetary policy may result in
a financial, fiscal and economic meltdown.

IX. In conclusion,


When discussing European governance after the
financial crisis of 2008, it appears that stateness does
indeed trump Europeanization in a dual sense – in terms
of real-world politics and as a concept:
The features of stateness appear to be resilient and may
even instrumentalize Europeanization to reproduce
themselves; while the transformations of stateness
within the EU system are asymmetric, i.e., stateness in
Germany, France, Portugal, Greece, or Italy undergoes
change in different and – absent a fiscal and political
union – not necessarily converging ways.

An analytic emphasis on stateness is necessary in order
to follow developments in the EU system, especially
since – in a period of prolonged ‘emergency politics’ –
the institutionally defined processes and rules are
applied in selective and asymmetric ways and forms of
intergovernmental negotiation have become dominant.
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