Fiscal austerity regimes as factor of political instability in the European Union

Volodymyr Samsonov

No 120, ZÖSS-Discussion Papers from University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS)

Abstract: This research examines impacts of austerity on the political instability in the European Union, defined as elevated levels of electoral volatility and ideological polarization. By analyzing macroeconomic theories that elucidate the effects of austerity on citizens' wealth and the national economic agenda, and, alongside, political theories that explore how voters' economic mindsets and interests are mobilized during national legislative elections, this study formulates hypotheses that assess the political viability of Keynesian versus Neoclassical (taxation- versus spending-based) approaches to austerity. Statistical analyses were performed to test these hypotheses across various groups of EU Members. The overall findings indicate that political repercussions of austerity are not uniform among European states. In EU Members with Continental European, Social- Democratic and Market-based capitalism, austerity has not emerged as a significant contributor to political instability. Conversely, the situation in South European states raises considerable concern. The dissonance between voters' Neoclassical perspectives and the prevailing Keynesian mainstream has led to increased electoral and populism. Importantly, this research does not posit that political risks should be regarded as the paramount consideration in the formulation of austerity policies. Rather, the primary objective of this study is to provide insights that can assist policymakers in macro-financial imperatives with political ramifications during austerity implementations.

Keywords: fiscal austerity; political stability; electoral volatility; ideological polarization; ideological dispersions; populism; Keynesian theory; Neoclassical theory; economic voting; European politics (search for similar items in EconPapers)
JEL-codes: E62 H12 P16 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cessdp:321892

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