Political Strategies and Fiscal Retrenchment: Evidence from Four Countries

Abstract

Political strategy matters – especially in the case of unpopular reforms. This is the main argument of this article. It shows that the analysis of political strategies gives complementary insights into the causal mechanisms of reform politics. It helps us to understand how political actors successfully implement unpopular reforms. The article provides empirical evidence for this claim by means of an analysis of adjustment efforts in Sweden, Belgium, Canada and France during the 1990s. It is shown that governments acted strategically in two areas: they used strategic manoeuvres in the political sphere in order to circumvent veto players. And they employed strategic organisation and communication in the public sphere in order to dampen the risk of being punished by voters for the implemented policies.

The global financial crisis, followed by a sharp global economic downturn, has led to rising deficits and debt in all industrialised countries. The OECD expects in its latest forecast the average debt ratio to increase to approximately 100 per cent of GDP in its member states by the end of the year 2011 (OECD 2010: 41). Therefore, governments face tremendous pressure to reduce public deficits and debt ratios to more sustainable levels in the post-crisis period after 2010. The adjustment packages enacted by the Greek, Spanish and British governments may just be the beginning of a much larger effort to reduce public debt. However, this situation is not entirely new for various OECD countries. Fiscal adjustments were high priority during the 1990s. In the last decade, 15 out of 23 OECD succeeded in balancing their budgets as a reaction to high deficits and debt (see Table 1). Against this background, and in the light of the challenges governments will face in the coming years, the question arises as to what we can learn from the successful fiscal adjustments1 of the 1990s. The focus of the following analysis is on understanding the causal mechanisms that led to successful adjustments (and adjustment failures) during the 1990s.

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).

This article tackles the central question of the reasons for the differences in adjustment performance from a particular perspective that has been widely neglected in the literature. Instead of examining quantitatively what factors account for variance in performance (Alesina and Perotti 1995; Mierau et al. 2007; Mulas-Granados 2006; von Hagen and Strauch 2001; Wagschal and Wenzelburger 2008a; Wenzelburger 2009b; 2010) or conducting another case study of the consolidation process in a specific country (Hallerberg 2004; Molander 2001; Wagschal and Wenzelburger 2008b), it focuses on political actors and their strategies. It shows that the strategic actions of political actors can help us explain why some countries manage to consolidate public finances at a certain moment in time, and why others do not.

The specific focus of this article on consolidation strategies certainly needs to be justified. First of all, we do not argue that political strategy is the only thing that matters when it comes to fiscal adjustments. It is self-evident that basic economic conditions, i.e. the objective need for a fiscal adjustment, explains to a certain extent why fiscal adjustments succeed (Mierau et al. 2007; von Hagen and Strauch 2001; Wenzelburger 2010). But an analysis of political strategy can at least improve our understanding of public policy outcomes. There are at least two good reasons for this claim. The first is theoretical. As Margaret Levi (2006) puts it, ‘institutions are a key ingredient of effective government, but equally important are the quality of leadership and the political environment leaders and institutions furnish’ (Levi 2006: 13). Thus, from an institutionalist perspective, we should not only focus on the possible barriers limiting political action. Instead, we ought to take into account how leaders act in a specific institutional setting.2 In the political science literature, the research on leadership often has a biographical quality (Blakesley 1995; Greenstein 1982) and there is no coherent theoretical approach to the concept of leadership that can be used in policy analysis (Peele 2005).3 However, in business and management a vast literature on leadership and, more precisely, ‘strategic leadership’ exists. In this strand of research, strategic leadership is understood as leadership ‘of’ organisations compared to leadership ‘in’ organisations (Hunt 2004: 26). One of the key insights of management studies is that strategic leadership matters most when organisations face an adaptive challenge (Boal and Hooijberg 2000: 515). Such ‘strategic inflection points’ (Burgelmann and Grove 1996) ‘create opportunities for leaders to develop new visions, create new strategies, and move their organisations in new directions as they traverse through the turbulence and uncertainty’ (Boal and Hooijberg 2000: 520). Applying this concept of strategic leadership to public policy analysis means that governments facing an adaptive challenge can be expected to act strategically and to implement reform policies. There is ample evidence from case studies that leadership and strategies do matter when major policy reforms are to be implemented (Goldfinch and t'Hart 2003; Keeler 1993; Moon 1995; Stiller 2010). And as economic crises can be seen as strategic inflection points that open ‘policy windows’ (Kingdon 1984: 174) to implement far-reaching reforms, we would strongly expect that political strategies and strategic leadership play a role when it comes to fiscal adjustments.

Apart from these theoretical considerations, there are, secondly, methodological reasons suggesting that we should investigate political strategies more closely. Today, one of the most common approaches to examining the development of governments' finances is the econometric analysis of aggregate spending and revenue data. This approach is rooted in the tradition of comparative political economy and has produced valuable results in different policy fields. However, in recent methodological discussions several voices criticise analyses relying solely on a statistical approach (Kenworthy 2007; Kittel 2006; Rubinson and Ragin 2007; Shalev 2007; Taagepera 2008). Lawson (1997) and Cartwright (2002) argue that one ought to know the causal mechanisms that bring about an outcome on the aggregate level, because they link the aggregate outcome to developments at the micro-level. Whereas in economics this causal link is often self-evident,4 the causal chain is more complicated in comparative public policy analysis: policy outcomes are caused by politicians interacting strategically in a specific institutional setting (Scharpf 1997). Therefore, the investigation of political strategies is useful to complement macro-quantitative analyses.

What is still missing, however, is a theoretical framework for the analysis of political strategies. In order to examine the strategies of political actors systematically, we must at least have some idea about what we should expect. This framework will be developed in the next section. After some methodological considerations, the article will later investigate the budget consolidations in Sweden, Belgium, Canada and France5 and identify the main political strategies used by political actors implementing them.

Veto Players, Votes and Political Strategy

General Theoretical Considerations

The article has argued that the investigation of political strategies should complement the ‘traditional’ variable-based approach to explaining policy outcomes – in this context, fiscal adjustments. As a theory for the systematic analysis of political strategies from a public policy perspective does not yet exist (Raschke and Tils 2007: 36), a new theoretical framework needs to be developed. However, some aspects can be derived from research into political leadership (Blondel 1987; Elgie 1995; Glaab 2007; Helms 2000), whilst others emerge from existing literature on political strategy (Raschke and Tils 2007; 2010b; Tils 2004).

First, the term political strategy needs to be defined. A broad description of political strategies is given by Raschke and Tils (2007: 127), who define it as calculations of political actors related to their aims, influenced by their means and their environment, that refer to more than just one concrete situation (unlike tactics).6 Following this approach, the point of departure should be the political actors and their ‘calculations’, their motives and preferences. If we concentrate more precisely on a certain policy outcome (e.g. fiscal policy), our focus shifts to the actors that are responsible for the outcome in question. Who is the actor to be analysed? Tsebelis (2002: 34) has shown convincingly that the political agenda-setter plays a decisive role in the policy-making process. Therefore, when analysing political strategy, we should focus on the agenda-setter in a certain policy field – in this case the minister of finance – and begin exploring her preferences. What are her preferences? From a public choice perspective one can argue that politicians in governments – or, in our case, ministers of finance – have two main utility-generating objectives: the implementation of ‘their’ policy programme (policy-seeking) and their re-election (office-keeping) (Alesina and Cuikerman 1990; Müller and Strøm 1999; Strøm 1989, 1990). The claim is that political strategy comes into play when one or both of these major aims is jeopardised (Raschke and Tils 2010a: 12).

Two possible sources of danger can be identified: first, veto players (partisan as well as institutional) can prevent ministers of finance from implementing the desired policy programme (Tsebelis 1995, 2002). Thus, political actors fearing that their policy project will be blocked have a strong incentive to use political strategy as a way of circumventing veto players. The greater the constraints, the more strategic manoeuvres are necessary to get the policy implemented. Secondly, governmental action is limited by electoral considerations (Ganghof and Bräuninger 2006). This is true when policy- and vote-seeking objectives contradict each other; more concretely, when a government has to implement unpopular policies. In this case, politicians face a trade-off between their policy-seeking and their vote-seeking goals.7 Its intensity depends, again, on two variables: the toughness of the party competition and public opinion about the policies. With respect to public opinion, the logic is straightforward: if politicians are responsive to the opinion of the electorate, they will align their policies with the voter's preferences (Ferejohn 1986: 7). Thus, very unpopular policies are highly unlikely to be implemented. The second variable affecting the trade-off is the extent of the party competition: the ‘harder the competitive struggle for votes and policies, the more likely executives are to pander to public preferences and the less opportunity governments have to pursue their own interests’ (Hobolt and Klemmensen 2008: 332). Therefore, it is safe to say that the more intense the competition between the parties, the stronger the trade-off.

As argued above, political strategies can be used to ease this trade-off. But in contrast to institutional constraints that can be circumvented by strategic manoeuvres behind closed doors, political strategies aimed at reducing the trade-off between policy- and vote-seeking goals have to be used in public: political actors that want to implement unpopular policies without being punished at the ballot box have to get in touch with the voter. There are two main ways of doing so. First, political actors can try to organise the adjustment programme strategically. This strategic organisation comes very close to what is known as ‘blame avoidance’ strategy in studies about welfare state retrenchment (Green-Pedersen 2002; Pierson 1996; Vis 2009; Vis and Van Kersbergen 2007; Weaver 1986; Zohlnhöfer 2007). Second, political actors can communicate with the electorate because the message accompanying the announcement of a spending cut makes a difference to the perception of the voters (Sarcinelli 2010; Schmidt 2001).

Figure 1 summarises the theoretical arguments discussed above. This theoretical framework can be used for the analysis of political strategies. Three additional remarks are required in order to explain the role of political strategy. First, Figure 1 shows that the trade-off of electoral politics and the constraining influence of veto players are interrelated: if a communication strategy proves to be successful in easing the trade-off, it is probable that the political actor (minister of finance) will have an easier life in the political sphere as well. Consider a two-party coalition government where the minister of finance (from the senior coalition partner) wants to implement an unpopular policy, whereas the minister of social affairs (from the junior partner) is likely to use her veto because the project is electorally risky. In this case, it would be helpful if the minister of finance could prove that the communication strategy or the strategic organisation of the programme minimises the risk of being punished at the ballot box. These interrelations have to be considered.

FIGURE 1 THEORETICAL FRAMEWORK FOR THE ANALYSIS OF POLITICAL STRATEGIES

Second, political strategies are not developed in a vacuum. Evidently, the environment plays an important role. The depth of an economic crisis influences how large policy windows are and how long they stay open (Kingdon 1984). Moreover, public receptiveness to political communication conditions the impact that strategic communication and the strategic organisation can have. Even a very well thought out strategy will not lead to a successful fiscal adjustment if the environment is very negative. Thus, when comparing the impact of political strategies, the basic conditions have to be kept in mind.

Third, part of the argument builds up on the assumption that political actors are afraid of being punished at the ballot box. Thus, one might think that one first has to answer the question as to whether the implementation of a fiscal adjustment really is electorally risky.8 In fact, the answer to this question is only of minor importance for the logic of the argument. What counts instead is the way political actors perceive the risk of being punished – and this perception might well be irrational. If a minister of finance thinks that the adjustment is unpopular with the electorate she will either refrain from implementing it or she will try to use political strategies in order to dampen the assumed negative effects.

Thinking of political strategy in this theoretical framework shows that it can be integrated in the variable-based approach of comparative public policy analysis. In the political sphere, strategic manoeuvres dampen the negative effect of veto players on the consolidation performance. Hence, they facilitate fiscal adjustments. And with regard to the electoral consequences of what politicians assume to be unpopular reforms, political strategy can also be seen as a determinant of budget consolidation, because it counteracts the negative effect of the trade-off of electoral politics. Thus political strategy is an additional variable, a complementary force that has an impact on the policy outcome. It is certainly not the one and only explanation for the success or failure of fiscal adjustments. But it complements existing reasoning.

What Strategies to Expect?

The theoretical framework laid out in the last section suggests that we should expect political strategies in the political as well as in the public sphere. This framework guides the following analysis of consolidation strategies. In order to make the investigation more systematic, this section provides some criteria for a cross-national comparison of consolidation strategies.

Political strategy in the political sphere

Several qualitative studies in different policy fields have pointed out that institutional constraints like veto players are not necessarily insurmountable for a political actor who wants to implement a certain policy (Egle 2009: 105; Zohlnhöfer 2003). Manfred G. Schmidt (2002) calls the political strategies used to circumvent institutional constraints ‘strategic manoeuvres’. It follows from the preceding section that the necessity of these manoeuvres depends on the institutional setting in a specific country. The influence of institutional arrangements on the policy-making process can be systematised by looking at the stages of policy-making (Sabatier 1999):

•	the decision in the cabinet about an adjustment programme – including the coalition parties9 as well as the spending ministers as possible veto players (‘common pool problem’) (Shepsle and Weingast 1981; Weingast and Marshall 1988);
•	the decision in Parliament (and parliamentary groups as veto players);
•	the inclusion of regional entities in the consolidation process (in federal states) (Stepan 2004: 326); and
•	the relationship between the president and the Parliament in presidential, or between the president and the government in semi-presidential systems.

What strategies can be expected at different stages of the policy-making process? The literature on public policy-making provides some insights into what could be successful strategies. With regard to the decision in cabinet, political strategy should probably be less important in a Westminster system where the minister of finance can push through a consolidation programme and where members of Parliament will agree if they are interested in a political career. Of course, the prerequisite for this logic to apply is that the prime minister supports her minister of finance – which can be seen as the most important strategic manoeuvre in those systems (for the Canadian case see Savoie 1999). In political systems with many strong veto players, more strategic manoeuvres are required. Whereas a coalition party can be disciplined by a detailed coalition agreement (Hallerberg 2004), parliamentary groups usually enjoy much more freedom than in Westminster systems. In order to cope with this, we would expect governments to use various disciplinary instruments that the political system offers in order to get the desired policy accepted (vote of confidence, omnibus acts, etc.). If a powerful second chamber exists, these kinds of strategic manoeuvres are also highly probable. In presidential systems and semi-presidential systems, the checks and balances between Parliament and the administration (or prime minister, respectively) offer a multitude of possibilities for strategic policy-makers, too. With regard to the regional organisation of a country, one can assume political strategy to play an important role in federal states. If central governments seek to implement a fiscal adjustment, they have to include the federal entities in some way. Therefore, national consolidation agreements could be a strategic manoeuvre to gain support from subnational entities for a fiscal adjustment (Balassone et al. 2003; Schratzenstaller 2008).

This collection of different expectations for political strategies shows clearly that there is a lack of systematic evidence although we have some general ideas from various case studies about what may be a successful strategic manoeuvre in a specific context. The qualitative analysis later in the article will therefore focus on political strategies and stick to the framework elaborated above.

Political strategy in the public sphere

If political actors regard the implementation of a fiscal adjustment as electorally risky, policy-seeking and office-seeking objectives oppose each other. It was argued above that two strategies can help political actors to ease this trade-off: first, politicians can organise the fiscal adjustment strategically; and second, they can use political communication in order to persuade the electorate of the policy.

An overriding concept that refers to both dimensions of political strategy was first developed by Kent Weaver (1986). He defined eight ‘blame avoidance strategies’ that are used by politicians in order to implement unpopular reforms (Weaver 1986: 385): (1) agenda limitation, (2) redefining the issue, (3) throw good money after bad, (4) pass the buck, (5) find a scapegoat, (6) jump on the bandwagon, (7) circle the wagons and (8) stop me before I kill again. Vis and Van Kersbergen (2007: 165) complemented Weaver's set of strategies by adding a ninth – ‘damned if you do, damned if you don't’ – and tenth – ‘creative accounting and lies, damns lies and statistics’ – strategy. Apart from the first (which means in essence that a costly policy is not implemented), all the other strategies are highly likely to be used by political actors when it comes to fiscal adjustments. However, the enumeration of different blame avoidance strategies obstructs the view that two dimensions of political strategy lie behind the blame avoidance: organisation and communication. Blame avoidance strategies are important on both dimensions, but they have different character.

The organisational aspect of political strategy focuses on the intelligent planning of a reform. Political actors can, for instance, implement harsh consolidation measures during their first year in office and hope that the voters have forgotten about them when they vote next time (‘honeymoon effect’). Or they can enact ‘hidden cuts’ via de-indexations instead of cutting the nominal amount of benefits (Wagschal and Wenzelburger 2008b; Wallis 1997). When it comes to strategic communication, blame avoidance is an issue too. In this case it means: phrasing the policy in a way that increases electoral chances (for a similar argument in connection with welfare state retrenchment, see Schmidt 2001). At the same time, strategic communication is not limited to blame-avoidance messages. We would also expect other messages, like the one Jens Henriksson (2007: 26) praises in his essay ‘Ten Lessons about Budget Consolidation’: ‘Never say that it won't hurt. Never say that it is peanuts’.

Case Selection and Methodological Issues

Case Selection

Political strategies can only be analysed qualitatively as there is no comparable data about these issues that would permit us to conduct a quantitative large-N analysis. Therefore, case selection is crucial. The most important criterion for case selection is that the preferences of the actors should be similar. More concretely, we should compare the strategies of ministers of finance who share the same goal – namely to consolidate public finances. Moreover, the case selection should enable us to single out the influence of political strategy on budget consolidation by controlling for possible impacts from other variables. Finally, selection merely on the dependent variable should be avoided (e.g. only successful or unsuccessful adjustments) (King et al. 1994: 129; Levy 2008: 8). Applying these considerations to the OECD countries10 yields the following case selection (Table 2).11

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

Ministers of finance – the main strategic actors under investigation – of all four countries were determined to reduce the deficits. This was the case in all the EU countries wanting to qualify for EMU, and it was the case in Canada because of external pressure from the financial markets. Second, selection bias is avoided by including three successful and one failed fiscal adjustment. Third, the case of France is comparable with at least one other country in respect of every criterion. It is a centralised state – like Sweden. It has a plurality electoral system – like Canada. Party competition is rather high – as in Sweden. The welfare state can be classified as part of the ‘conservative world’ – as in Belgium. It has a non-corporatist system of interest intermediation – like Canada. And, public opinion towards the adjustment effort was sceptical – as in Belgium. Case selection cannot rule out every alternative explanation for the success or failure of fiscal adjustments; the four countries still exhibit different combinations of variables that could be held responsible for the variation in consolidation performance.12 Consequently, the influence of political strategy has to be extracted by means of a detailed analysis of processes and strategies (George and Bennett 2005: 207).

Data and Method

The analysis of political strategies is methodologically problematic as there exists virtually no empirical data about political strategy that can be considered ‘objective’. Strategy is an issue that political actors prefer to talk about behind closed doors. As political strategy lies at the very heart of a political system, the only way to access the information is qualitative interviews with political actors – finance ministers, prime ministers and their direct collaborators.13 This way of generating information is problematic. First, in terms of access to high-level politicians. Second, even if access is secured, it is difficult to differentiate between storytelling (and ex post justifications of a certain decisions as ‘strategies’) and facts. One remedy used was to conduct several interviews with different actors, who answered the questions from different perspectives. Second, an attempt was made to confront political actors with rival interpretations, whenever different interpretations appeared. Third, official documents and press articles provided an additional source against which statements could be cross-checked. In this manner it was possible to extract a coherent story.14 Evidently, detailed process tracing of fiscal adjustments in the respective countries served as the basis for the interviews, to ensure that a profound understanding of the political system of the country as well as fiscal adjustment policy was warranted. The communication strategies were examined by means of qualitative content analysis of key parliamentary speeches (budget speech, governmental declaration, etc.) about fiscal and economic policy during the consolidation periods (Mayring 2000). In that way, the most important messages could be extracted.

Political Strategy as an Explanation for Budget Consolidations? Evidence from Four Countries

Consolidation Strategies in Sweden 1994–2000

Strategic manoeuvres in the political sphere

In Sweden, the failure of the four parties in the right-wing (minority) government between 1991 and 1994 to agree upon a tough adjustment programme shows that gaining cabinet approval is not an easy task. The social democrats, who came to power in 1994, learned from this mistake. The new prime minister, Ingvar Carlsson, prepared the handover of power very carefully and made it clear from the outset that fiscal adjustment was the top priority of his government. Hence, the election platform of the social democratic party was accompanied by a list detailing the spending cuts which the party could implement once in office. The fact that this list found its way into the party platform provided a clear signal to the party and to future ministers that he was determined to enact harsh measures. A further signal was his tight control over the membership of the government: he even chose the secretaries of state – a decision traditionally made by the respective minister (Isaksson 1995: 165–84). Moreover, ministers were given folders containing policy guidelines and had to sign contracts in which they officially accepted the initial budgetary situation and committed themselves to the goal of fiscal adjustment:

I don't remember the exact wording now, but the whole idea was that if they wanted to become members of this cabinet, they should accept the situation. That we had decided to take considerable cuts and maybe more cuts and we had one overriding responsibility and that's to save the economy of the country. If they didn't want to accept that, they should not be members of this cabinet and should wait for better times.15

Finally, Carlsson organised a cabinet retreat before the new government took office, because he wanted all members of his government to start with the same knowledge. The idea of these different measures was to create awareness among ministers that the situation was exceptional and that he, as prime minister, would not accept any attempt at non-compliance: ‘We ended up after the first week in this new government with a determination to do this [the consolidation measures], and to do it quickly. … That was the atmosphere in the cabinet.’16

The second strategy was closely linked to the first. The prime minister declared from the beginning that his minister of finance was a real primus inter pares. Carlsson gave Göran Persson free rein to achieve the necessary spending cuts.17 In cabinet, he supported Persson consistently, so that spending ministers did not have a chance to oppose the adjustment measures. This enshrined authority of the finance ministry (which had declined under the right-wing government) increased even more as a result of the strategic actions of Persson himself. He asked his department to ensure that the macro-economic forecast systematically under-estimated economic growth and over-estimated the unemployment ratio and interest rates. The goal was quite evident:

Because if they [the other ministers] had seen our revenues, the feeling of crisis might have gone away. So when we came to the end of the year, and you could see the whole picture, yes, the expenditure side was under control. Sometimes it was even below. But the revenues were quite a lot higher than we had anticipated, because we had under-estimated the economic growth.

Another possible constraint on fiscal adjustment lurked in Parliament. As the social democrats had no majority, they had to organise parliamentary support from another party. That necessitated strategic manoeuvres. The first strategy of the Carlsson government was to change partners in the middle of the mandate. The first consolidation packages were implemented with the support of the Left party (Vänsterpartiet), because they included not only spending cuts, but also considerable tax hikes (a claim of the Left party). In January 1995, the government realised that more spending cuts were necessary. As the Left party did not agree, Göran Persson negotiated a compromise with the Farmer's party (Centerpartiet) to cut social spending. Consequently, it proved possible to achieve both considerable tax increases and tough spending cuts.

Nevertheless, all consolidation packages needed to be approved by Parliament. Several strategic manoeuvres were used: during the period of co-operation with the Left party, package deals played a major role as some of the structural reforms of the previous centre-right government were rescinded (e.g. the re-organisation of unemployment insurance). Moreover, the government used the impetus of the victory in the election strategically and negotiated the first big adjustment package during its first weeks in office.18 In the negotiations with the Centerpartiet, another package deal was concluded: in exchange for support for the spending cuts, a reduction of value added tax on food was agreed. As this package deal was controversial in both parliamentary groups, the political actors increased the pressure: Göran Persson and Olof Johansson, leader of the Centerpartiet, linked their political future to the package: ‘And they [the members of Parliament] realised: the government will fall, we will have a new election – we will lose. So, it was a momentum I used. But that was my last chance.’19 Finally, the government acted strategically with regard to its own party. Carlsson and Persson had won the fight over the adjustment programme before taking office. Consequently, the parliamentary group could not easily oppose the plans.

The third constraint the government faced in the political sphere stemmed from the fiscal decentralisation of the country. The municipalities in Sweden have relatively strong taxing and spending power, hence fiscal adjustment could only be carried out in co-operation with local governments (Jahn 1999; Rodden 2004). At the same time, the central government wanted to cut transfer payments to the municipalities, which represented a significant spending item in the budget. The government reacted strategically in different ways: first, it legislated a ‘balance requirement’ that forced local governments to balance their budgets as well. Second, the government did not just cut transfer payments, but changed the distribution formula. This created not only losers among the municipalities but also some winners – thereby impeding the emergence of a united municipal opposition to the reform. Third, the government replaced earmarked transfers by blocked transfers responding to a request by the municipalities.

Political strategy in the public sphere

Fear of being punished for the consolidation measures at the next election haunted the government. ‘This was not a policy to gain at the polls, but it was necessary to rescue Sweden from the hands of the financial markets. It was no chase for popularity.’20 To reduce the risk of losing the next election, the government acted strategically. On the organisational level, several measures were taken:

•	The hardest cuts and biggest tax hikes were implemented at the beginning of the mandate.
•	The consolidation programme incorporated clear and transparent goals and the government fulfilled them (partly because of the under-estimation of macro-economic indicators).
•	By announcing the adjustment programme before the election and asking for an ‘open mandate’ to implement even further measures, the government received a carte blanche from voters that could be used during the consolidation period to justify the measures.
•	Some ‘hidden cuts’ were introduced, e.g. by linking the inflation adjustment of social benefits to the budgetary situation (full adjustment only in case of a balanced budget).
•	All groups in society and all regions were affected by the adjustment measures, e.g. by tax increases for the higher income groups as well as cuts in unemployment insurance.

Moreover, the government deployed certain core messages repeatedly. The first can be labelled ‘national sovereignty and democracy’. It was used in many speeches underscoring the fact that there was no alternative to adjustment if Sweden wanted to remain a sovereign country governed by its own elected Parliament and not the International Monetary Fund (IMF) or creditors on the financial markets. ‘The one in debt is not free’ (Riksdag 1995a) – this famous statement by Göran Persson summarised the point in a nutshell.

Linked to this argument was the message that the adjustment programme was necessary to save the Swedish welfare state, the symbol and pride of the nation. Fiscal adjustment policy was framed as social democratic policy:

The mandate of the social-democratic government is based on the assumption that we have the mission and the confidence of the electorate not only to overcome the economic crisis but also to create a solid basis on which we can guarantee our welfare state in the future. (Göran Persson – speech of 5 April 1995 (Riksdag 1995b))

Very often, this point was related to the message that the burden was shared equally by all groups in society. Both messages underlined the idea of the fiscal adjustment as a core social-democratic policy (Henriksson 2007: 19).

Of course scapegoating also played a major role. One can differentiate between two targets. First, predecessors were blamed – the conservative government.21 And, second, the financial markets were blamed because they speculated against the Swedish Crown and made the adjustment necessary.

Finally, the government tried, at least in the second part of their mandate, to nurture hope for a better future. They declared that they intended to restore the generosity of some social programmes after the end of the acute crisis and to undo the tax hikes.

Consolidation Strategies in Belgium (1994–2000)

Strategic manoeuvres in the political sphere

In Belgium, several institutional and partisan veto players can potentially block a policy initiative: the cabinet, the parliamentary groups and the federal states.

During the consolidation years, the Belgian government not only reunited the two party families (Christian democrats and social democrats) but, in fact four parties (because of the ethno-linguistic divide). Thus, prime minister Jean-Luc Dehaene and finance minister Philippe Maystadt (as well as the budget minister Herman von Rompuy22) had to take account not only of the opinions of the other spending ministers, but also of the interests of two different party families, and of different regional preferences. In this situation, political strategy was used, mainly by the prime minister, in order to push the fiscal adjustment measures through his cabinet. Dehaene labelled his government an ‘emergency cabinet’ (Couttenier 1993: 364). He thus focussed his government on the issue of fiscal adjustment. Second, Dehaene strongly supported his finance minister.23 A third strategic manoeuvre was to implement a medium-term fiscal framework from 1993 on. This made consolidation via one-off measures difficult. The fourth strategic instrument used to keep the spending ministers in check was to resolve most important issues within a small inner circle of the cabinet. The members of the circle were the prime minister and the four vice prime ministers (from the four different parties).24

The different coalition parties were a second institutional constraint in cabinet. In spring 1993, the government went through a real crisis because the parties could not reach a compromise over several consolidation measures (Blaise and Lentzen 1993: 41–43). The main reason was that the president of the biggest party, the Christian democrats from Flanders (CVP), was not directly involved in the negotiations as he was not a member of the government. Dehaene acted strategically: he went to the King and offered to resign. The King accepted but asked Dehaene to talk directly to the party leaders in order to find a compromise and to form a new government. The strategic manoeuvre was successful: negotiating directly with the four party leaders, Dehaene managed to find a compromise and returned as prime minister. From that point on, the CVP president Herman von Rompuy was a member of the cabinet as budget minister.

A second important strategy for encouraging consensus in the coalition can be labelled ‘objectifying strategy’. This strategy was used in connection with the High Council of Finances (HCF). The HCF was an expert committee whose mission was to check if the Belgian public finances conformed to the EMU convergence programmes. However, the HCF was not only an expert committee, but also a strategic instrument the government could use to prepare compromises. Its supervisory board consisted of members from different regions and from different societal groups (trade unions, employer associations, national bank). For the minister of finance, anxious to get spending ministers and the parties behind adjustment, HCF recommendations proved very helpful. First, they were written by experts and therefore perceived as ‘objective’. Second, the supervisory board of the HCF could be used to discuss proposals in a relatively safe environment before introducing them in cabinet.

A similar strategy of ‘objectifying’ was used by Dehaene in connection with the big social policy reform package – the ‘plan global’ (Arcq 1993; Deschouwer and Deweerdt 1994: 275). Dehaene objectified the measures by mandating an expert commission to analyse ways of modernising the Belgian social security system. The president of the commission was the president of the national bank, Fons Verplaetse, a close collaborator of Dehaene. The commission itself consisted of experts from the trades union and employer organisations as well as from the four coalition parties. Dehaene's strategy was clear: first, he needed ‘objective’ reform proposals from experts to justify the measures. And second, by discussing the issues in a small commission of experts, the different positions of the coalition parties converged. Although this strategic manoeuvre was not successful in the short run (negotiations over a social pact based on the report of the commission failed), the convergence of party positions enabled the cabinet to find a compromise.

Finally, Jean-Luc Dehaene separated discussions about constitutional reform and Belgian federalism from fiscal policy issues.25 Constitutional reform was not discussed in his cabinet, but between the parties and the language groups. This prevented the consolidation measures from being linked too closely to constitutional reform issues which are of particular political salience.

After having achieved a consensus in cabinet, the Dehaene government had to cope with the parliamentary groups. Whereas the social democrats were quite disciplined, the Christian democrats caused some problems (Blaise and Lentzen 1993: 20).26 To circumvent this, the government used strategic manoeuvres at decisive moments – the so-called ‘special powers’ (Couttenier 1997: 525).27 If Parliament decides to give special powers to the government (via the loi d'habilitation), the latter can enact laws by royal decree without a supplementary vote in Parliament.28 This method was used, first, to implement measures included in the social security reform (‘global plan’).29 Special powers were also used in the summer of 1996, when the finance minister wanted to implement further austerity measures without debate in Parliament in order to make sure that Maastricht criteria could be met. Finally, the government used omnibus laws (loi-programme) that could not be discussed and voted on separately.30

These strategic manoeuvres were not only used in the Lower House but also in the Senate – especially until 1995. During the first years of the fiscal adjustment, the second chamber could work as a ‘real’ institutional veto player.31 More elaborate strategies to win the Senate were not necessary, because the centre-left government had a majority in both houses.

The Belgian political system cannot be understood without grasping the influence of the regions and language groups over federal policy-making. Overall, the context for the fiscal adjustment during the 1990s was complicated because the different entities had negotiated a sophisticated mechanism that changed the system of equalisation and transfer payments gradually (Savage 1989, 1994; Spinnoy 2002). The federal government knew that this mechanism was sacrosanct. If they had tried to re-negotiate it, it would have created severe problems between the regions. At the same time, the government wanted to make sure that the entities consolidated their public finances as well – especially the severely indebted Wallonia region. The strategic manoeuvre adopted was to strengthen the HCF. The experts in the HCF created a special unit to evaluate whether transfer payments between the entities and the federal government had developed as predicted in the federal–regional agreement and whether deficits were being reduced.32 During the 1990s the federal government concluded a series of new federal–regional agreements in which both sides committed themselves to the adjustment programmes – on the basis of the HCF recommendations.

Political strategy in the public sphere

Despite the dominance of the Christian democrats since the Second World War, the Belgian government was afraid of being punished at the ballot box because of the adjustment policy.33 Attempts by liberal party leader Guy Verhofstadt to form a purple coalition (liberals, social democrats and Green party), showed that a government without the Christian democrats was not inconceivable.

Six government strategies intended to mitigate the electoral costs of adjustment can be identified:

•	The timing of the consolidation packages was strategic as the government tried to slow austerity measures immediately before elections. The election of 1995 was held before the end of the mandate, as the government knew that the 1996 budget would be tough.
•	Hidden cuts were widely used. Examples were the de-indexation of tax brackets and the introduction of a ‘health index’ which slowed the inflation rate by excluding price increases of goods like tobacco, alcohol and fuel.
•	Expert committees were installed not only to circumvent veto players in the political sphere (see above) but also to show the public that the government was only doing what the experts recommended.
•	The adjustment programme affected everyone: tax hikes for the wealthy were introduced as well as cuts in transfer payments and pensions.
•	By using special powers in Parliament, the government signalled to the voters that this was an emergency situation.
•	The incorporation of management and labour in the negotiations was intended to show the public that the government had tried to find a broad societal consensus for the adjustment measures (‘blame sharing’).

When it comes to communication strategies, several messages were used to convince the public that the measures were absolutely necessary. The most important was that it was vital for the future of Belgium to participate in the EMU. Jean-Luc Dehaene underlined this message in his first speech as prime minister (Dehaene 1992):

The consolidation of public finances is an indispensable element of the integration of Belgium in European Monetary Union. Our country, that lies at the heart of Europe, and whose economy is orientated towards foreign countries and especially towards Europe, our country has to be in the first group of countries that will take part in European Monetary Union before the end of this century.

Blame avoidance played a major role, too. Three strategies can be distinguished. First, the government blamed the EU (and EMU) for forcing adjustment on them (Blame Brussels). Even the social security reform was justified in terms of European convergence (SFI 1993: 6). Second, politicians blamed the markets. It was the financial brokers on Wall Street that wanted to see the reforms implemented. And it was the capital markets that were reluctant to invest in a country whose economy was not competitive (Dehaene 1994: 2182–83). And, third, experts were held responsible for the adjustment programme. They (e.g. the HCF) made the recommendations and the government merely enacted what had been proposed.

A third message – as in Sweden – was that the entire adjustment programme was socially well balanced, even if the consolidation measures were tough. Moreover, the government sold the retrenchment of the social security system as ‘modernisation’ (SFI 1993: 9). This modernisation was described as saving the welfare state and not dismantling it. This positive spin was included to show voters, that the social democrats and the Christian democrats were trying to implement their traditional policies – but in a new environment for which the government was clearly not responsible.

Consolidation Strategies in Canada (1994–2000)

Strategic manoeuvres in the political sphere

Budget consolidation in Canada was implemented by a Liberal majority government. Thus, cabinet constraints were limited to the spending ministers who could oppose expenditure reductions proposed by the minister of finance. That this was not the case was largely because prime minister Jean Chrétien supported his finance minister Paul Martin wholeheartedly (Martin 2008; Savoie 1999: 156).34 This effect was reinforced by the institutional setting. The Canadian Westminster system concentrated power in the hands of prime minister Chrétien and all members of government were aware of this. When Chrétien demonstrated his support for the minister of finance and the consolidation programme, ministers did not dare to protest.35

A second strategic manoeuvre was to shroud budget proposals in secrecy. In that way, ministers and deputies were not given the occasion to protest pre-emptively against cuts or tax hikes, but had to do so after the presentation of the budget. Given the power of the prime minister, this would have meant sacrificing their political future. Donald Savoie (1999: 171) describes this as follows:

Martin's first budget in 1994 was important. It presented tough spending reductions to unemployment insurance and closed down some defence bases. Both came as a surprise to ministers. Martin with Chretien's full support wanted no public consultation nor did he want to deal with the lobbying of ministers and government backbenchers on either issue.

The third strategy was to hide windfall profits from spending ministers. Paul Martin included several important ‘contingency reserves’ in the budget, where millions of dollars were tucked away. Consequently, at the end of the fiscal year, ministries met their spending targets, but reserves were (generally) not used, thus reducing the deficit and debt.

As the political system in Canada consists of two houses, a government has, theoretically, to fear a veto from both chambers. In reality, the Senate does not intervene very actively in routine work (Docherty 2002: 34–37). Thus, the strategic manoeuvres of the government were mainly directed at the parliamentary group in the House of Commons. The most important strategies used were secrecy and the absolute support of the finance minister by the prime minister. A liberal parliamentarian emphasised, in addition, the power of patronage (Savoie 1999: 92): ‘To be frank, … some of us probably think that we would make excellent ministers, or failing that, judges or senators. We all know who makes these appointments, and why would we want to bite his hand …?’

Whereas many strategic manoeuvres in relation to the Parliament were not necessary, the federal organisation of Canada required political strategy. Canada is one of the most decentralised countries (Keman 2000; Lijphart 1999). But when it comes to transfers, financial relations between Ottawa and the Provinces are quite unbalanced, because the federal government has the right to cut transfers to the provincial governments unilaterally (Supreme Court of Canada 1991). Certainly, the Provinces have the right to increase their own provincial taxes. But they are not completely independent from Ottawa because federal grants cover big spending items such as welfare, health and education. For the federal finance minister Paul Martin, transfer payments to the Provinces were a major target for spending cuts. In his ‘landmark’ 1995 budget (MacKinnon 2003: 205; Maslove and Moore 1997: 40), he merged the different transfer systems into the ‘Canada Health and Social Transfer’ and cut the payments by $6 billion (Department of Finance 1999: 41). He decided on those measures without asking the executives in the Provinces: ‘I presented the Provinces a fait accompli. It was done.’36 At the same time, Martin acted strategically. He abolished national standards for social programmes (apart from health care) – which had been a constant demand of the Provinces, giving them more liberty to do with the federal dollars as they wanted (Phillips 1995: 24; Prince 2006: 214–15). This was a first strategic manoeuvre of the government to get the Provinces on its side. The second was to phase the spending cuts in over three years.37 In the first year, the programmes were merged while cash transfers remained stable. In the second, a substantial cut was implemented, but the biggest cut occurred in the third step. This phasing in was ‘extremely politically astute’ (Phillips 1995: 12). The third strategy was to mask the extent of the cuts by mixing cuts in cash transfers with a new equalisation formula and the transfer of tax points (MacKinnon 2003: 221). All three strategies made it difficult for the Provinces to fight against the spending cuts. As there was no legal right to oppose the cuts, the only way would have been to use their ‘soft powers’. But the strategic manoeuvres made this a very hard task. In the end, the Provinces complained, but accepted the new federal–provincial transfer system.

Political strategy in the public sphere

When analysing the constraints on fiscal adjustment policy that arose from electoral politics, two variables are important: party competition and public opinion about the consolidation measures. In the case of Canada, the trade-off was prima facie not very strong because the opposition of the Liberal party was fragmented and the population was aware of the budgetary crisis.38 However, the case of budget consolidation in Alberta that had started a couple of years earlier showed that spending cuts could lead to electoral punishment even though the population supported deficit reduction in general (Steward 1993). Hence, despite a generally positive environment for fiscal adjustment, the Liberals feared punishment at the ballot box. ‘Did we realise the risks? Yes. That's why we did it in the first couple of years of the mandate. Was I concerned about the political fallout? Yes, but not as much as the prime minister or the rest of Cabinet.’39

Political actors thus linked the identification of the trade-off with a clear organisational strategy: to enact the harshest measures at the beginning of the legislature. Further strategies in terms of the organisation of the adjustment were:

•	to set up a stepwise consolidation programme and to fulfil each stage by forecasting the external factors (economic growth, interest rates, etc.) cautiously40 (Chrétien 2007: 51);
•	to equalise the pain of the cuts across all constituencies and regions (Chrétien 2007: 70; Phillips 1995: 12).

The communication of the adjustment programme played a major role in Canada. The finance minister participated in various debates around in the country (Martin 2008: 124). During the preparation of the 1995 budget, the finance ministry used a specific strategy to convince people of the necessity of the adjustment measures: it asked the finance committee to organise hearings and to invite representatives from various pressure groups, lobbies and the trade unions to participate in a frank debate about the budgetary trade-offs the government faced. The idea was to get people with different preferences in terms of public spending in one room and to show them that the decision about the specific adjustment measures was not an easy task (Gray 2003: 126). Moreover, the government did not only think about the communication strategy after the measures were decided. On the contrary: polls and focus groups were used in tests to evaluate the impact of different messages (Martin 2008: 199).

By analysing the major speeches on fiscal policy issues, several key messages can be identified. First, the government blamed its predecessor, the Mulroney government. Second, the government used the message of ‘fairness’ quite widely. Budget consolidation was described as fair – ‘fair among our regions and fair among individual Canadians’ (House of Commons 1995). In addition, to do away with deficits and debt was fair among generations – an argument that was exploited by Paul Martin several times.41 Third, the Canadian Liberals are – comparatively – a unique species of liberals when it comes to the welfare state. Whereas liberal parties in Western Europe generally want to shrink the state sector, the Liberals in Canada are considered to be a welfare state party, as they introduced the main components of today's social security system. Against this background, one can understand a third communication strategy: to sell the fiscal adjustment as a means of securing the future of the Canadian welfare state (House of Commons 1996), as in this speech of Paul Martin's:

Canadians feel our very way of life is at risk. They look at Medicare and feel it is threatened. They look at the pension system and wonder if it will be there for them in the years to come. They consider the economy and they worry that the gale force winds of competition and change will carry away their jobs. Canadians think about their children, our youth, and ask what kind of opportunities will be left for them. If there is one obligation before government today, it is to do its part to address these deep concerns. It is to do what we must so that confidence can overcome anxiety and hope can replace despair. In short, we must act now to help Canadians secure their future.

The minister of finance thus framed adjustment as vital for the future of Canada as a nation. The fact that Martin referred in his speech to the health care system was certainly no coincidence: Canadian health care is a national icon, often compared favourably by Canadians to that of the US. Thus, a fourth communication strategy was to portray the necessity of the adjustment as a question of national identity and the future of the country.

In connection with the transfer payments cuts, the government used a (fifth) strategy of ‘blame downloading’: the federal government assumed no responsibility for the reactions on the provincial level. Instead, they tried to obfuscate that in fact adjustment measures at the provincial level were due to the decrease of transfer payments. The provincial governments were to be blamed, not Ottawa.

Finally, a sixth strategy was used from the moment when the first signs of success could be seen. Starting with the budget speech in 1996, the government pointed out the policies that would be possible when the budget was in balance and the burden of high interest payments diminished.

Successful Consolidation Strategies in Comparison

The foregoing has analysed consolidation strategies in three countries that succeeded in balancing their budgets in the 1990s. Before turning to the unsuccessful case – France – this section provides a short overview of the strategies identified and points out the similarities. Table 3 recapitulates the main strategic manoeuvres that were used in the political sphere, and Table 4 displays the strategies used to counteract the negative effect arising from the fear of being punished at the ballot box.

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

Strategic Lessons from a Failed Fiscal Adjustment: The Case of France (1995–2000)

The concept of political strategy used here considers political strategy as an explanation of budget consolidations, or, more precisely, as a means of limiting the impact of variables that constrain political action. Consequently, a lack of political strategy or an ineffective strategy means that the constraining impact of the two variables discussed above – institutions and electoral politics – comes into full effect and limits consolidation efforts. Thus, analysing the case of France, the question arises as to whether political strategy can complement our understanding of why the French adjustment failed.

Strategic manoeuvres in the political sphere

In the political sphere, the most important veto player interfering with adjustment efforts was the French president Jacques Chirac. From 1995 to 1997, he first delayed adjustment by ‘his’ right-wing government (led by prime minister Alain Juppé) in order to fulfil his own spending pledges in 1995 (Juppé 1995). Second, Chirac pushed his plan of a decrease in personal income tax through the government and Parliament in autumn 1996, thereby contradicting the adjustment measures that had been decided in connection with the Plan Juppé just a couple of months earlier (Arthuis 1996; Le Monde 1996; Les Echos 1996). Finally, from 1997 to 2000, after the victory of the left-wing government of Lionel Jospin, Chirac revealed on TV that the ministry of finance was ‘hiding revenues’ and demanded to cut taxes (Chirac 1999). Although the finance minister Christian Sautter was using the money to reduce deficits, public debt and interest payments, the president provoked a campaign in the media against ‘la cagnotte’ (Sereni and Taddei 2005: 108–9). This was the beginning of the end of adjustment efforts that had never been very substantial.

How could the minister of finance or the prime minister have reacted strategically in order to avoid the constraining influence of the president? For the prime minister Alain Juppé and his conservative finance minister Jean Arthuis (1995–97) it was very hard to act strategically against the will of the president, because in such a ‘united government’ constellation the president is, in practice, the chief of the government. However, in case of ‘cohabitation’, the influence of the president on fiscal policy is limited. How then did the president succeed in undermining the adjustment efforts of the socialist government by provoking the campaign against savings? Here, the lack of strategy is evident. Two points can be made. First, the socialist government had not decided what to do with windfall profits (Sereni and Taddei 2005: 109). In contrast to Belgium, where windfall profits were intentionally used for deficit reduction, the French finance minister had to hide them. If a rule had existed, the campaign about ‘hidden savings’ would not have been possible. Second, the prime minister did not back up his finance minister.42 Christian Sautter was not a heavyweight like his predecessor, Dominique Strauss-Kahn. Therefore, he would have needed the absolute support of the prime minister. As this was not the case, his position was undermined. In the end, he had to resign and his successor, Laurent Fabius, implemented a tax reform ending the saving plans (Dupont et al. 2000).

In cabinet, constraints on the fiscal adjustment policy were insignificant. In the conservative government (Juppé–Chirac), the strong position of the president and the ‘directive style’ of the prime minister did not require them to act strategically in cabinet.43 During the first years of cohabitation, when minister of finance Dominique Strauss-Kahn implemented some tax hikes and slowed down spending increases, it was prime minister Jospin who interfered at an early stage in the budget process backing up the plans.44

Bigger institutional constraints arose from the parliamentary groups – at least for the socialist government. Whereas the conservatives had a large majority and prime minister Juppé used all the instruments of the ‘rationalised parliamentarianism’ that the French system offers (vote bloqué, vote of confidence) the majority of the left-wing coalition was smaller. This situation demanded strategic action – and the Jospin government failed. The best example, again, is the campaign about hidden savings. Here, the parliamentary group revolted against the finance minister's idea to save the windfall profits. Although the French system offers powerful instruments for disciplining the factions, the prime minister did not back up the finance minister by using them. Instead, deputies succeeded in their revolt and the windfall profits were utilised for tax cuts.45

Political strategy in the public sphere

The fear of being punished in the next election constrains political actors who want to implement unpopular fiscal adjustments. The extent of the constraint depends on party competition and public opinion about the adjustment measures. In France, party competition between the left and the right was high. Moreover, the public opposed fiscal adjustment.46 Politicians knew this47 – but did not react adequately in terms of political strategy. On the contrary, they used no or ineffective strategies.

With regard to the organisation of the fiscal adjustment, several examples reveal a lack of strategy. First, the Juppé and the Jospin governments did the exact opposite of what the Swedish government had done in its election campaigns. They did not ask for a mandate to balance the budget, but promised to spend more. This behaviour considerably reduced subsequent room for manoeuvre. Second, there was no clear consolidation plan. Neither the conservative government nor the socialist government embedded adjustment measures in a long-term framework.48 Third, in contrast to Belgium, trade unions and employers were not incorporated adequately in decision-making. The best example is the Plan Juppé: this plan was initially a comprehensive reform package which could have helped in balancing the budget. But, as it was decided unilaterally by the government and pushed through Parliament without even informing organised labour, the trade unions were furious. By means of the ‘pressure of the street’, public sector pension reform which could have facilitated the fiscal adjustment was stopped (Egle 2009: 143). Thus, a lack of organisational strategy can be identified as one reason for the failure of the French adjustment.

Strategic communication is a second way of influencing the trade-off between electoral politics and the implementation of fiscal adjustment. But if one analyses the key speeches about fiscal policy in France, no coherent message can be identified. On the contrary, before the elections, the politicians promised tax reductions and a higher minimum wage. Once in office, they realised that the public finances were in trouble. This approach, coupled with the constant demands of president Chirac for a reduction in the tax burden, led to confusion (Henriksson 2007: 30). A second problem was that the claim adjustment necessary to meet the Maastricht criteria proved less credible than in Belgium, not least because of frequent attempts by president Chirac in 1995 to soften them.49

Conclusion

This article has investigated the strategic dimension of budget consolidations in the 1990s. It has shown, by means of a qualitative analysis of adjustment efforts in Sweden, Belgium, Canada and France, that political strategy played a role and that it can add a complementary perspective to our understanding of the politics of fiscal adjustment. In order to analyse political strategies from a public policy perspective, this article proposed a theoretical framework. The core of the argument is as follows: as budget consolidations are unpopular, governments that want to implement adjustment measures face two major constraints: they fear institutional blockades in the political sphere as well as punishment by the voters at the next election. These two constraints can be counteracted by political strategy. Strategic manoeuvres in the political sphere enable politicians to circumvent possible veto players for the consolidation policy: spending ministers in cabinet, coalition parties, parliamentary groups, federal states or the president. The trade-off in terms of electoral politics, i.e. the risk of being punished for unpopular policies, can be counteracted in two ways: by strategic organisation of the consolidation measures and by political communication persuading voters that the adjustment is necessary.

While there are some common strategies that seem to work regardless of the specific environment (see Tables 3 and 4), it is safe to say that the idiosyncrasies of the countries determine to a great extent what strategies can be used effectively. When examining the strategic manoeuvres in cabinet and in relation to Parliament, we observe more similarities between Belgium and Sweden than between these two countries and Canada. Thus, the form of government (coalition or single-party) and institutional features such as the electoral and the party systems seem to influence the appropriateness of a strategy in the political sphere. On the contrary, we do not find such a pattern for the strategies in the public sphere. These tentative interpretations show that there might be some pattern and some regularity. A more sophisticated analysis of what strategies are chosen under what circumstances is required. This article has laid the groundwork. It has suggested a theoretical framework for the analysis of political strategies and it has provided evidence that political strategies were used by political actors and that they most probably mattered.

Certainly, political strategy is not the only explanation for budget consolidation. The initial situation plays an important role, and so too do other economic and institutional variables. Even for political variables, indirect and conditional effects can be identified (Wenzelburger 2009b). These explanations do not lose their validity by stating that political strategy matters. The main point of this article is that we can learn from the investigation of political strategy because it gives us a complementary insight in the causal mechanisms from a perspective that is often overlooked in comparative public policy analysis.

Acknowledgements

Many thanks to the interviewees for agreeing to speak with me. An earlier version of this paper was presented at the ECPR Joint Sessions of Workshop in March 2010 and benefited from comments made by the participants. In addition, I want to thank Jan-Erik Lane, Sebastian Jäckle, Frieder Neumann and the two anonymous reviewers of West European Politics for their helpful suggestions. The usual caveats apply.

Notes

1. The term ‘fiscal adjustments’ is used as a synonym for ‘budget consolidations’.

2. What Levi calls leadership is quite close to what I will call political strategy in this paper (see below for a definition).

3. However the concept of leadership has been discussed extensively in various books and the different leadership styles of heads of governments have been compared in various ways (Blondel 1987; Elgie 1995).

4. Hoover (2002: 160) provides an example how to trace back social regularities to individual decisions.

5. The reasons for selecting these cases are discussed below.

6. Leadership can be considered to be a prerequisite for the use of political strategy (Glaab 2007: 308).

7. This argument does not apply in cases when the implementation of a certain policy is expected to lead to a positive effect on the vote-seeking goals. Evidently, if a policy is popular with the electorate, there is no ‘trade-off’.

8. All in all, the empirical evidence for such a punishment is rather shaky. On the one hand, the punishment for welfare state retrenchment is conditioned by other variables and the effect is rather small (Armingeon and Giger 2008; Giger and Nelson 2011). On the other hand, there is some support for the punishment hypotheses, when we look at fiscal adjustments (Mulas-Granados 2004). The only empirical study with a competing result (Alesina et al. 1998) was heavily criticised by Mulas-Granados (2004; 2006) for the indicators and the methods employed.

9. For the sake of the clarity of the analysis, parties will be considered united actors (as in most of the research about parties in government) knowing that factions can play a significant role in certain cases.

10. We limit our analysis to the OECD countries (most-similar-cases design) in order to have rather similar political and economic environments.

11. Although Germany would have been a comparable case institutionally, fiscal policy during the 1990s was highly influenced by re-unification, making Germany a special case.

12. Moreover, and as mentioned above, this paper does not argue that other variables did not play a role. On the contrary, there is ample evidence that they did play an important role. The point here is that the analysis of political strategy adds a complementary (and often neglected) aspect to our understanding of the politics of unpopular reforms.

13. The interview partners were, in Sweden: Ingvar Carlsson, Erik Åsbrink, Göran Persson, Olof Johansson; in Belgium: Philippe Maystadt, Réginald Savage, Philippe Busquin, Jean-Luc Dehaene; in Canada: Jean Chrétien, Paul Martin, Jocelyne Bourgon, Scott Clark, Art Eggleton; in France: Christian Sautter, Jean Arthuis. The interviews were based on a semi-standardised questionnaire and were conducted between November 2008 and March 2009.

14. In leadership research, the method of oral history interviews is seen as a possible remedy for the lack of direct data about leadership in governments (Riley 2009). The same argument applies for the analysis of political strategies, which faces similar problems as interviews are the only way to access to internal information.

15. Ingvar Carlsson in an interview with the author.

16. Göran Perrson in an interview with the author.

17. Erik Åsbrink and Göran Persson in interviews with the author.

18. Göran Persson in an interview with the author.

19. Göran Persson in an interview with the author.

20. Olof Johansson in an interview with the author.

21. Ingvar Carlsson in an interview with the author.

22. He came into office in the second year of the consolidation period and replaced Mieke Officiers.

23. Philippe Maystadt, who was also responsible for the finances in the preceding government (prime minister Martens) described in an interview with the author that the support was much higher, ‘in order to implement consolidation measures that were not necessarily after everyone's taste’.

24. Jean-Luc Dehaene in an interview with the author.

25. Jean-Luc Dehaene in an interview with the author.

26. Philippe Maystadt in an interview with the author.

27. Jean-Luc Dehaene in an interview with the author.

28. The Parliament can, theoretically, withdraw the special powers at any time.

29. In this case, the juridical basis was the law of competitiveness of 1989 stating that the special powers are given to government when a committee of experts declares that the competitiveness of the country is in danger.

30. Jean-Luc Dehaene and Philippe Busquin in an interview with the author.

31. The reform of 1993 that came into effect in 1995 transformed the senate into a ‘chambre de refléxion' without veto power in the ‘usual’ legislative process (Zink 2000: 181).

32. Réginald Savage in an interview with the author.

33. Jean-Luc Dehaene and Philippe Busquin in interviews with the author.

34. Jean Chrétien and Paul Martin in interviews with the author.

35. One important point was the reaction of Chrétien, when the minister of industry, John Manley, came to him to complain about the cuts imposed by the ministry of finance. Chrétien's reaction was to punish him for this attempt by cutting his budget even stronger than intended originally (Martin 2008: 140).

36. Paul Martin in an interview with the author.

37. Jean Chrétien in an interview with the author.

38. In a 1993 poll, 78 per cent of the respondents said that there was a need of action in the deficit (The Toronto Star 1993).

39. Paul Martin in an interview with the author.

40. Paul Martin explained the different instruments used to fulfil the self-imposed targets in an interview with the author: ‘We did a couple of things, that I think, no other country has done. This really made us very successful. One: We set no five-year-targets. No long-term targets. Everything is in a rolling two-year-target. And the second thing is: We said we are going to beat those targets. So, the first year, I said we will reduce the deficit from 42 billion to 39 billion. And I got hell from everybody: “Oh, that's not good enough. And all the economists went crazy.” I didn't give a damn what they thought. All I cared about was to beat that 39. So we did. You know, a year later, people had forgot about all the criticism. And then, we beat it in the second year. And that built up more support for the deficit-fighting than you could possibly believe. And it's because I set very easy targets in the beginning.’

41. Paul Martin in an interview with the author.

42. Christian Sautter in an interview with the author.

43. Jean Arthuis in an interview with the author. The ‘directive style’ can also be interpreted as a strategy, but the interviews seem to suggest that it was less a strategy of Juppé than his (unintended) style of leadership.

44. Christian Sautter in an interview with the author. In addition, the ministers of the main coalition party, the communists, ‘were just happy to be in government as their party was already on the up and up’.

45. Christian Sautter in an interview with the author.

46. Some hints: The Maastricht treaty including the convergence criteria was only accepted with a slight majority of 52 per cent; president Chirac won the election in 1995 because he promised to reconcile the ‘social rupture’ in the society, whereas the ‘reform’ candidate, Edouard Balladur, had no success.

47. Jean Arthuis and Christian Sautter in an interview with the author.

48. The only exemption was the medium-term plan in the direct pre-Maastricht period in order to meet the deficit criterion. But after qualification for the EMU, the budget deficit was more the result of the development of expenditures and revenue than an indicator from which expenditures and revenues were derived.

49. Jean Arthuis in an interview with the author.