Political Strategies and Fiscal Retrenchment: Evidence from Four Countries

Figures & data

TABLE 1 
FISCAL ADJUSTMENTS IN OECD COUNTRIES DURING THE 1990s

Country	Time	Size of adjustment	Ranking
Australia	1994–2000	−0.49	10
Belgium	1994–2000 (2006)	0.70	3
Denmark	1996–2000 (2001)	0.28	5
Finland	1994–2000 (2001)	0.25	6
UK	1994–2000 (2001)	−0.21	8
Ireland	1994–2000	2.84	1
Iceland	1995–1997	−0.52	11
Italy	1999–2000	−0.61	12
Canada	1994–2000	−0.06	7
New Zealand	1993–1997	−0.41	9
Netherlands	1996–2000 (2001)	0.56	4
Austria	1996–1997	−0.71	13
Sweden	1994–2000	0.90	2
Spain	1999–2000 (2003)	−0.86	15
US	1996–2000	−0.82	14
Note: No successful fiscal adjustment can be found in eight countries: France, Germany, Greece, Japan, Luxemburg, Norway, Portugal, and Switzerland. The underlying definition of a fiscal adjustment and the calculation of the size of the adjustments (based on z-standardised values) has been discussed elsewhere (Wenzelburger 2009a).

FIGURE 1 THEORETICAL FRAMEWORK FOR THE ANALYSIS OF POLITICAL STRATEGIES

TABLE 2 
CASE SELECTION

	Sweden	Canada	Belgium	France
Consolidation	Yes	Yes	Yes	No
Political will of finance ministers	Yes	Yes	Yes	Yes
Federalism	No	Yes	Yes	No
Type of welfare state (Esping-Andersen)	Social-democratic	Liberal	Conservative	Conservative
Electoral system	PR	Plur.	PR	Plur.
Vetoplayer	Few	Some	Many	Some
Party competition	High	Low	Medium	High
Interest intermediation	Corporatist	Non-corpor.	Corporatist	non-corpor.
Public receptiveness/public opinion towards consolidation	Neutral	Positive	Negative	Negative

TABLE 3 
MAIN STRATEGIC MANOEUVRES IN THE POLITICAL SPHERE

Stage in the policy process	Potential institutional constraints	Main strategic manoeuvres	Examples
Cabinet	Spending ministers	• Budget consolidation as a top priority	• SWE: Election manifesto, contracts with ministers, cabinet retreat; BEL: Cabinet as ‘emergency government’, coalition agreement about adjustment issues
		• Prime minister supports his finance minister absolutely	• In all three countries under investigation
		• Finance ministry gets a strategic advantage in relation to the other ministries	• SWE: Underestimation of economic growth, overestimation of the unemployment and the interest rates; CAN: contingency reserves
		• Decision of the consolidation measures in an inner circle of the cabinet	• BEL: Core cabinet with prime minister and vice-prime ministers; CAN: prime and finance minister decide
	Coalition parties (BEL)	• Integration of the party presidents in government	• Dehaene reshuffles his cabinet in order to include the president of the CVP in his government.
		• Public commitment of all parties to the adjustment	• Coalition agreement focuses on the fiscal adjustment.
		• Special strategy to prepare consensus	• ‘Objectifying’: Positions of the coalition parties converge in ‘objective’ expert committees
Parliament	Factions	• Omnibus acts	• SWE: Deputies can just accept or refuse a complete consolidation package, but not individual measures; BEL: Loi-programme
		• Creation of ‘special situations’	• SWE: Finance minister Persson threatens to resign if the consolidation programme is refused; BEL: Pouvoirs spéciaux
Federalism/ decentra-lisation	State governments	• Cuts in transfers coupled with an increase of authority for the federal states/municipalities	• SWE: New distribution formula for the transfer system and more authority for the municipalities; CAN: Big CHST reform and less national standards

TABLE 4 
MAIN ORGANISATIONAL AND COMMUNICATION STRATEGIES

Strategy	Example
Strategic organisation
Timing of the fiscal adjustment: Front-loading	In all three countries under investigation
Equal distribution of the ‘pain’ of the adjustment	In all three countries under investigation. (In Belgium and Canada to a greater extent regionally.)
Blame avoidance via hidden cuts	SWE, BEL: Hidden cuts via de-indexation of benefits.
Midterm planning of the adjustment; safeguarding that the goals were met	SWE, CAN: The finance ministries plan the midterm goals less ambitious so that they are certain to meet them. This helps to create public support for the adjustment programme
Strategic communication
Description of the budget consolidation as a national challenge	BEL, CAN, SWE: In order to portray the fiscal adjustment as a task for the entire nation and its future, the politicians pointed out, that everybody had to participate.
Fiscal adjustment as social policy	BEL, CAN, SWE: The key message was that the future of the welfare state could only be safeguarded if the fiscal adjustment was done now
Blame avoidance	• Blame the predecessor: SWE: Blaming Bildt. CAN: Blaming Mulroney
	• Blame the markets and blame the EU: SWE: The financial markets speculating against the currency asked for the fiscal adjustment; BEL: The international competition between countries to attract capital asked for the reform of the social security system and the fiscal adjustment
Fiscal adjustment as a temporary programme	SWE, CAN: Message that there will be new social programmes and less taxes as soon as the budget was balanced and the interest payments were reduced.
National identity	CAN, SWE: The budget consolidations were said to be a question of national identity – in Canada and Sweden because debt and deficits menaced the financing of the welfare state; in addition, the Swedish government felt that democracy was in danger

Wenzelburger , Georg . 2009a . ‘The Analysis of Budget Consolidations. Concepts, Research Designs and Measurement’ . Journal of Economic and Social Measurement , 34 ( 4 ) : 269 – 91 .

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