The Limits of Europeanization: explaining low reform capacity in Greece?

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The Limits of Europeanization explaining low
reform capacity in Greece?

• Work in Progress
• Kevin Featherstone
• LSE

2
Greece Europeanization

• Europeanization is everywhere recent growth of
  studies of domestic change attributed to
  Europeanization.
• Risk of normative bias.
• Looking at cause too readily accepting the
  effect. Convincing empirical evidence?

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Europeanization as the frame

• Such studies face major challenges in
  establishing rigorous causal explanations
  identifying
• linking mechanisms (Goetz, 2000) between EU
  domestic sphere
• key intervening variables (e.g. actors,
  institutional capability, discourse, policy
  structure Radaelli, 2003)
• significance relative to other stimuli (external,
  domestic).
• Non-deterministic outcomes.

4
Europeanization frustrated?

• Despite
• high public support for EU membership in Greece
• Declared commitments of successive governments
  for EUs EMU Lisbon 2000 Agenda
  modernisation.
• Greece has been one of the worst in implementing
  EU laws, adopting single market legislation
  Lisbon reforms.
• Why?

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How to explain relative failure?

• Europeanization perspective helps to explain
  agenda identify response, but there are limits
• Greece displays a paradox of capability
  integrated political leadership condition (a
  simple polity unitary centralised unicameral
  majoritarian) appears to be met, but reform
  capacity is low.
• To explain non-adaptation, we should not start
  from Europe accounting for actor interests
  ideas in domestic setting requires other
  conceptual frames.
• What are we missing in the domestic system to
  deepen our explanation of low reform capacity?

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Structuring interests

• How does domestic system structure rational
  interests, behaviour?
• Modelling the domestic system mode of interest
  mediation (unions-employers-government) politics
  of the welfare regime interests derived from
  economic model.

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What model? Interest mediation

• Unions parentela pluralism (Pagoulatos, 2003)
  diverse but rent-seeking behaviour from state.
  Disjointed corporatism (Lavdas, 1997)
  corporatist structures lacking compromise
  trust, unable to sustain stable pacts.
• Historically, statism has structured
  expectations of each of the social partners
  (including the government)
• Conflictual e.g. tripartite social dialogue in
  1997, 2000 failed.

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What model? Welfare regime

• Mediterranean-type (Ferrera, 1996) highly
  fragmented provision. Peaks of generosity (e.g.
  public sector pensions) lack of coverage (e.g.
  unemployment benefit). Affects rational
  interests undermines labour mobility.
• Late-comers agenda (Pierson, 1998) provision
  still being created alongside defence of
  privileges immovable objects versus agenda on
  equity. Powerful vetoes.
• High fiscal burden of pension privileges with
  social inequity result of political interests,
  as well as available resources.

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Politics of pensions

• To some significant extent, technocratic
  consensus on need for reform.
• Yet, sub-optimal outcomes slow, piecemeal.
• No crafted social model to defend, bare
  interests rather than social choice.
• Actors defend interests in knowledge of welfare
  gaps vulnerabilities in provision, and
  expectations of reform weakness. System
  encourages them to be risk averse
  rent-seeking.

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What model varieties of capitalism

• More state capitalist (Schmidt, 2002) than LMEs
  (UK), CMEs (Germany) (Hall Soskice, 2001), but
  states impact varies.
• Mixed Market Economy (Molina Rhodes, 2005)
  more corporatist than in LMEs, but more
  fragmented less able to coordinate than CMEs or
  deliver collective goods.
• Lacks complementarity low social protection,
  high jobs protection. Strong domestic veto
  points, low reform capacity. Prisoners dilemmas.

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Modelling interests in the Greek economy
Self-employed more than double EU15 av. Family
workers 3x EU15

• Company structure very few large enterprises and
  very many micro- and small-firms
• Employment structure reflects late
  industrialisation importance of services
  disproportionate size of agriculture relatively
  small manufacturing sector
• Participation low participation of women
  part-time workers significant problem of
  long-term unemployed.

Services 65 Agric12
Female one of lowest in OECD part-time a third
of EU15 average
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Structuring representation
Total Employers organisation density is half
that of EU15 average
Product market regulation 2nd most restrictive in
EU15 worst in ease of doing business (World
Bank).

• Business voice favours few large firms (SEV),
  rather than myriad of very small enterprises .
  GSEVEE, not representative of small and medium
  size businesses in Greece. A fragmented coalition
  with no clear agenda. Thus a consensus emerges in
  the business community for a domestic market of
  anti-competitive regulation, barriers to entry,
  relatively cheap labour stable product demand.
  Business constituency for liberal market measures
  is thus limited and shallow.
• Union voices over-represent the public (and
  wider public) sector (GSEE, ADEDY), favouring
  the interests of a highly protected core group of
  workers, rather than temporary irregular,
  informal workforce. Prioritises rigidity over
  flexibility irregularity.

Overall, union density is above EU15 average, but
unionisation in private sector is low
Ratio labour cost/ hours almost half EU15
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Split rationality differential political voice

• VoC follow median voter. But where is the
  median voter?
• Split rationality differential political voice
  (private sector versus public sector workers)
  (few large firms myrid of small enterprises)
• Affects rational actor interests towards
  privatisation labour mobility pensions.
• A problem of governance low reform capacity from
  a set of structural conditions distorted
  representation, conflictual interests, skewed
  limited public provision.

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Bringing the State back in
Govt sector cost highest in EU15 one of lowest
in effectiveness scores
2nd worst in EU in Global Corruption Index

• A long-term statist tradition (a developmental
  state) but its effectiveness and efficiency is
  comparatively low, undermining the capability to
  deliver public goods.
• Perceived corruption and tax evasion is very
  high, undermining competition and the effective
  delivery of public services and functions. Large
  informal economy.
• State spending on social protection is relatively
  high, but skewed and this affects actor
  rationality on welfare employment.

Shadow economy (28 of GDP?) largest in EU15
Total Social Expend as of GDP close to EU median
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Addressing the puzzle modelling responses

• There is a weak domestic constituency for market
  and welfare reforms, with the rational interests
  of key social actors defined by (a) the
  limitations of current (welfare) provision and
  compensating employment protection (b) protected
  markets with stable product demand.
• Stop-go, incremental policy reform is the most
  likely outcome across such sectors.

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Limits of VoC

• Not a simple problem of selfish unions inertia
  of few big firms (nor of party or personality).
• Wider systemic conditions need to be
  incorporated e.g.
• Inefficiency, low resources of state
  administration low implementational strength.
• Conflicting interests of clientelism undermines
  will to reform.
• Cultural factors corruption, mistrust,non-complia
  nce.
• Limited public space for debate on options.
• Above consistent with Simitis, 2007.

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Reform deficit in a conducive economic climate

• Period here is not one of economic difficulty
  (with higher adaptational costs), but one of
  exceptional growth (with more scope for side
  payments)
• Thus strength of opposition indicates (a) the
  embedded strength of the current system (b) the
  failure of new social forces to emerge in the
  boom years (c) failure of government to advance
  ideas to win support from potential winners
  build a reform coalition.

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Yet Greek contrasts

• Capability Greek performance has varied between
  sectors.
• Very good macro-economic performance since 1996
  high GDP growth convergence in inflation,
  deficit debt levels. Distinctive features here
  external commitment device of EMU relative
  autonomy exclusivity of domestic policy
  management in this area.
• Contrast with problems in enacting supply-side
  reforms welfare modernisation weaker EU
  leverage a more open and diffuse domestic policy
  process.
• Testifies to nature of EU policy instrument
  (adoption-implementation) how contrasting
  domestic settings structure actor access
  interests.

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So limits to Europeanization

• For Greece, domestically, a systemic problem of
  governance. Low reform capacity from both state
  weakness structure of interest mediation.
• For EU issues of its ability to coordinate a
  programme of economic social reform weakness
  of Lisbon process in face of domestic opposition.
  Capability-expectations gap?
• Conceptually Europeanization VoC
  approaches need not be incompatible. One extends
  limits of the other. Delve deeper into
  structures of rational interest, vetoes to
  explain EU effects domestic response
  contrasting Greek sectoral performance.