keeping the euro at any cost? explaining preferences for

Keepingtheeuroatanycost?ExplainingpreferencesforeuromembershipinGreeceEL IAS D INAS (OXFORD UN IVERS I TY )

IGNAC IO JURADO (UN IVERS I TY OF YORK )

N I K I TAS KONSTANT IN ID I S (CAMBR IDGE UN IVERS I TY )

STEFAN IE WALTER (UN IVERS I TY OF ZUR ICH )

APSA2016,Philadelphia

PuzzleEurozonecrisis has been incrediblyharsh oncitizens incrisis countries...

....yet support for the commoncurrency,the euro,remains strong.

0%

10%

20%

30%

40%

50%

Nothing upto20% 20-50% over50%

SubjectiveincomelosssincebeginningofcrisisGreece,December2015

Publicopinionabout the euroEurobarometer,2009-2016

APSA2016 Dinas/Jurado/Konstantinidis/Walter:Keeping the Euroatany Cost? 2/15

ResearchQuestions

1. Why dovoters inEurozonecrisis countriessupport staying inthe Eurozone?

2. Is there atipping point atwhich more austerity could unravelthis support?


Why dopeople inthe Eurozonewant to keepthe Euro?Possible Explanations

o Materialinterests§ Thosebenefittingfromfixedexchangerateswanttokeeptheeuro.§ Thosehurtbyausteritywanttoleavetheeuro.§ Thosethinkingthatleavingtheeurowillleavethemeconomicallyworseoffwanttokeeptheeuro.

o Nationalidentity/generalattitudetowardsEuropeanintegration§ ThoseviewingEUintegrationpositivelywanttokeeptheeuro.§ ThoseworriedthatleavingEMUmeansleavingtheEUwanttokeeptheeuro.

o Institutionalconstraints§ ThosebelievingthatEMUconstrainsroomtomaneuverofnationalpolicymakersinapositivewaywanttokeep the euro.

o Uncertaintyassociatedwithexit§ Thoseworriedabouttheuncertaintyassociatedwithaeurozone exitwanttokeep the euro.


ResearchDesignCasestudy of Greece§ Countrymost negatively affected by the Eurozonecrisis§ Has been close to aeurozone exit,issue is salient and notjustatheoretical option.

Originalsurvey data from three survey waves§ Collected over 2015:- July (justbefore referendum),N=989- September(before parliamentary elections),N=1018- December (afterimplementation of first MoU measures),N=1050

§ December-wave specifically designed to tap differentexplanations for euro support§ Surveyexperiment onAusterity-Grexit tradeoff inJuly and December surveys


Supportfor the Euro1. Personally,whichofthefollowingdoyouthinkisbestforGreece’s

future?• Stayintheeuro• Adoptnationalcurrency

2. Ifcouldchoose,whichofthefollowingwouldyouprefer?• KeeptheeuroandstayintheEU• LeavetheeuroandleavetheEU• LeaveboththeeuroandtheEU


Reasons for staying inthe eurozone

0% 10% 20% 30% 40% 50% 60% 70%

Stayb/cnooneknowswhatwouldhappenifGreecelefteuro

BeinginEMUforcesGreekpoliticianstoactresponsibly

Greekgovwouldnotimplementreformsw/oEUpressure

GrexitisbeginningofendforGreekEUmembership

EuromeansGreeceispartofEurope'sheart

Strongpre-crisisgrowthshowsthateuroisgood

Inlong-runmyincomewillbemorestableifGreecekeeps…

Grexitwouldmeanlessausterity

Grexitwouldsignificantlyreducemyincome

Greeceshouldstayintheeuro

Percentstronglydisagreeingwithstatement Percentstronglyagreeingwithstatement


Explanatory PowerBetacoefficients of perceptions about euro

Logit models

DV:◦ KeepEuro(1),Adoptnationalcurrency (0)

Controls:◦ Age◦ Gender◦ Education◦ urban/rural◦ govmt.evaluation◦ partyvotedintheSeptember2015election

Stability

Past Growth

Less Austerity

Less Income

Uncertainty

Responsibility

Reforms

End EU

Heart of Europe

Left

Nationalism

Unification

-4 -2 0 2 4Beta Coefficients


Results IIUsing euro-unrelated questions

EUinstit_BetterThanGreekOnes

LeftRight_Placement

EurUnification_GoneTooFar

National_Identity

PersonalIncomeloss_inCrisis

Effe

cts

with

Res

pect

to

-.1 -.05 0 .05 .1Marginal effects on Pr(keep euro)

Note: Control variables include age, education, gender, income and dummies forrural, public employment, private employment, pensioner, unemployed

Marginal effects on likelihood of support for the euro


How does austerity affect supportfor the euro?

Staying inthe eurozone comes atthe price of austerity.

ØIs there atipping point where Greeks start prefering „Grexit“over austerity?

Past research suggests that agrowing awareness of the austerity-Grexit tradeoffshould lower support for the euro.

Evidence:o Developmentover timeo ExperimentalEvidenceo Vulnerability profiles and preferences

Eurosupport over time

TheGreek bailout referenduminJuly 2015makes clear thateurozone membership comesatthe price of austerity.

Asthis realization sinks in,support for the euro declinesconsiderably.

75%

14%7% 5%

69%

16%11%

4%

65%

21%

12%

2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

StayinbothEUandeurozone

StayinEU,leaveeuro

LeavebothEUandEurozone

Noanswer/Do't

know

July2015 Sep15 Dec15

DevelopmentofattitudestowardsEurozoneandEUmembership

July- December2015


SurveyExperimentSurveyexperimentdesignedtoexaminehowvotersrespondwhenexplicitlyconfrontedwiththeAusterity-Grexit tradeoff(JulyandDecemberwaves).

Controlgroup:◦ “Personally,whichofthefollowingdoyouthinkisbestforGreece’sfuture?”

Treatment1:◦ “Observerssaythatstayingintheeurorequiresmorepensioncutsandtaxincreasesforthenextmonths.Personally,whichofthefollowingdoyouthinkisbestforGreece’sfuture?”,

Treatment2:◦ “Observerssaythatstayingintheeurorequiresmorepensioncutsandtaxincreasesforthenext4-5years.Personally,whichofthefollowingdoyouthinkisbestforGreece’sfuture?”

Answercategories:“Stayintheeuro”/“adoptanationalcurrency.”

11

ExperimentalEvidence


Vulnerability Profiles

Amajority of Greeks is veryvulnerableto both austerityand Grexit.Ø Crisis resolution verydifficult:any strategy willhurt.

13

not vulnerableeuro exit-vulneuro exit-vuln

austerity-vuln. very vulnerable to both very vulnerable to both

not/a little vulnerable

very vulnerable

0

25

50

75

100

perc

ent b

y Vu

lner

abilit

y to

aus

terit

y

0 20 40 60 80 100percent by Vulnerability to euro exit

not/a little vulnerable very vulnerableVulnerability to euro exit


Vulnerability profiles andpreferences

.2.4

.6.8

1ke

ep e

uro

(ego

tropi

c)

none austerity Grexit bothVulnerability profiles: vulnerable to...

Note:Preference to 'keep the euro and stay in EU'

I. Euro: % wanting to keep euro

12

34

5Ap

prov

al M

oU

none austerity Grexit bothVulnerability profiles: vulnerable to...

Note:1= fully disagree with direction of MoU, 5=fully agree

II. Austerity: Approval of MoU

Vulnerability profiles and preferences OnlyvulnerabletoGrexit◦ Preferenceforeuroplusausterity(internaladjustment).

Onlyvulnerabletoausterity◦ Preferenceforanationalcurrencyandlessausterity(externaladjustment).

Vulnerabletoboth◦ Unrealisticpreferences:keeptheeurowithoutausterity.


Conclusion• Highsupport for the euro is less dueto enthusiam for the commoncurrency butfears about the uncertain and materialconsequencesof leaving EMU.

• Strongsupport for the euro has made it possible (and legitimate?)for nationalpolicymakers to implement unprecedented austerity.

• Asthe austerity-EMUexit trade-offbecomes more transparentandas the costs of austerity rise,support for the euro declines.ØPossibility that there is atipping point afterwhich public starts preferringeurozone exit.

ØRisk that Eurozonecrisis leads to collapse rather than institutional deepening .


Reasons for staying inthe eurozone

0% 10% 20% 30% 40% 50% 60% 70%

Stayb/cnooneknowswhatwouldhappenifGreecelefteuro

BeinginEMUforcesGreekpoliticianstoactresponsibly

Greekgovwouldnotimplementreformsw/oEUpressure

GrexitisbeginningofendforGreekEUmembership

EuromeansGreeceispartofEurope'sheart

Strongpre-crisisgrowthshowsthateuroisgood

Inlong-runmyincomewillbemorestableifGreecekeeps…

Grexitwouldmeanlessausterity

Grexitwouldsignificantlyreducemyincome

Greeceshouldstayintheeuro

Percentstronglydisagreeingwithstatement Percentstronglyagreeingwithstatement

Uncertainty

Materialinterests

EUintegration

Instit.constraints

keeping the euro at any cost? explaining preferences for

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