Cherry-picking external constraints: Latvia and EU economic governance, 2008–2014

ABSTRACT

The paper analyses Latvian economic policy during the period 2008–2014 when the country was simultaneously subject to three European Union (EU) economic governance frameworks – the European Semester, the Balance-of-Payments programme and the Maastricht convergence criteria (for euro adoption). Through in-depth process tracing based on public policy documents, interviews with senior officials in Riga and Brussels and the press, the paper finds that the Latvian government cherry-picked and instrumentalized EU economic policy targets and overachieved in them. In contrast to the literature depicting the European Commission as a neoliberal actor which systematically undermines social protection, the paper shows that against the backdrop of fiscally austere national authorities, the Commission instead played the role of social policy advocate, repeatedly calling for stronger measures to help the poor. Shedding light on the limits of one-size-fits-all governance, the findings of the Latvian case have significant implications for EU economic governance more generally.

KEYWORDS:

• Conditionality
• crisis
• EU economic governance
• euro accession
• European Semester
• social policy

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes on contributor

Edgars Eihmanis is a PhD researcher at the European University Institute in Florence, Italy. Address for correspondence: Via della Badia dei Roccettini 9, 50014, San Domenico, Fiesole FI, Italy.

Notes

1 The European Semester is an annual cycle of economic policy co-ordination, according to which the Commission undertakes a detailed analysis of the member states’ reform programmes.

2 Latvia adopted the Fiscal Compact through the Fiscal Discipline Law that entered into force in March 2013.

3 The inflation rate may not exceed 1.5 percentage points above the rate of the three best performing member states. Budget deficit may not exceed 3 per cent, while government debt – 60 per cent of GDP. The long-term interest rate on government bonds may not be higher than two percentage points the rate of the three best performing member states. Finally, a member state must participate in the ERMII mechanism for at least two years without severe tensions.