Advocacy coalitions and the lack of deposit insurance in Banking Union

Abstract

This paper shows that advocacy coalitions surrounding the establishment of a European Deposit Insurance System lead to spillovers into incompatible areas. Alternative spillovers were to increased public backstops and state aid. Intent to minimize costs, Germany and the Netherlands have pushed for wide-ranging risk reduction measures: that go to the core of financial practices in southern Europe, while Italy has pushed for greater public backstops and state aid within EMU. Unable to break the deadlock in Council, the EU awaits Basel Committee guidance on how to deal with sovereign risk exposures in its 2017-2018 work program.

Deciding upon the Banking Union: How a joint belief shift instigated deep institutional change in Eurozone governance

“…Third, scholars identify the importance of coalitions or policy networks in the establishment of the BU. Donnelly (2018) uses advocacy coalition theory to demonstrate how coalitions of countries advocated for or against the BU or promoted different plans for BU on the basis of their beliefs. Coman (2019) shows how Brussels-based think tanks produced most of the expert reports on the crisis between 2008 and 2012 to infuse policy actors with novel or alternative ideas that inspired and legitimized their existing policy ideas.…”

“…First, scholars acknowledge that the crisis alone is not the sole explanatory factor for the creation of the BU. In studies on the BU, the Eurozone crisis is rather seen as a triggering event that set the scene to discuss the BU as a potential policy solution to solve the crisis (Donnelly, 2018;Epstein & Rhodes, 2016;Schäfer, 2016).…”

“…A second caveat is that BU scholars do not explicate the research methods and research data they use to study the establishment of the BU (Donnelly, 2018;De Rynck, 2016;Howarth & Quaglia, 2016). This complicates the analytical process of distinguishing the causal mechanisms that contribute to institutional change.…”

Supranational Agents as De-Commitment Devices: The ECB During the Eurozone Crisis

“…While an ESM direct recapitalization instrument was adopted in the end, it was subject to stringent condition that complicated its activation and reduced its value as a risk sharing instrument (Epstein and Rhodes 2016, 425;Howarth and Quaglia 2016, 173-4). In a similar vein, creditor countries block the introduction of a European deposit insurance scheme (Donnelly 2018).…”

Scrutiny or Complacency? Banking Union in the Bundestag and the Assemblée Nationale

“…The German Bundestag is particularly active on eurozone crisis policies and has extensive powers (Auel & Höing, 2014;Auel, Rozenberg, & Tacea, 2014;Höing, 2013;Moschella, 2017). The question is to what extent these dynamics led to a close scrutiny of banking union that could potentially constrain governments (Donnelly, 2018). This is highly relevant, as EU crisis policymaking has often been criticized for lacking democratic input and debate (e.g., Sebastiaõ, 2021).…”