Games borrower governments play: the implementation of economic adjustment programmes in Cyprus and Portugal

Abstract

Research on the Economic Adjustment Programmes (EAPs) for Eurozone crisis countries has so far acknowledged the role of creditor countries and Troika institutions or has examined the economic effects or structural determinants of domestic implementation processes. The role of borrower governments as strategic actors within the ‘Troika complex’ has been neglected. Taking Cyprus and Portugal as cases in point, the article shows how reform-oriented borrower governments used the interaction with the Troika to overcome veto player opposition to programme implementation. Drawing on the two-level game and on negotiation theory, the study discusses borrower strategies in response to opposition from the court or parliament, and the costs of no agreement. Reform-oriented governments mostly used commitments to the international level or Troika pressure to pursue coercive strategies vis-à-vis domestic opponents. High costs of no agreement seem to be a necessary means to pass on political and market pressure through coercion.

Keywords:

• Troika
• IMF
• EU
• veto players
• credit lending
• two-level game

Acknowledgements

An earlier version of this paper was presented at the conference ‘One Crisis, Many Perspectives: Understanding the Politics of the Eurozone Crisis’, 29–30 January 2018, University of Zurich. We are indebted to Stefanie Walter and the participants of the workshop, as well as to two anonymous reviewers for helpful comments. Natan Azabal Pereira provided valuable research assistance.

Disclosure statement

The authors report no conflicts of interest. The authors alone are responsible for the content and writing of this article.

Additional information

Funding

This work was supported by the Deutsche Forschungsgemeinschaft (DFG) under [Grant No. LU 867/2-2].

Notes on contributors

Susanne Lütz

Susanne Lütz is Professor for International Politics at the FernUniversität Hagen. Her research focuses on international economic organisations, Eurozone politics, financial markets and financial market regulation. She is currently conducting a research project on Troika‒debtor interactions during the Eurozone crisis. [[email protected]]

Sven Hilgers

Sven Hilgers is a research fellow at the FernUniversität Hagen. As part of the research project ‘Credit Lending as Two-Level Game: Troika‒Debtor Negotiations in the Eurozone’ he analyses the process of negotiation and implementation of financial assistance programmes in the Eurozone. His dissertation project investigates the changing nature of the European Central Bank. [[email protected]]

Sebastian Schneider

Sebastian Schneider is a research fellow at the FernUniversität Hagen. As part of the research project ‘Credit Lending as Two-Level Game: Troika‒Debtor Negotiations in the Eurozone’ he analyses negotiation and implementation processes of financial assistance programmes in the Eurozone. His dissertation project analyses the implications of national growth models for economic policy making. [[email protected]]