Keeping the euro at any cost? Explaining attitudes toward the euro-austerity trade-off in Greece

Abstract

Despite years of crisis, the euro has enjoyed strong popular support across the Eurozone periphery. In light of the high costs of internal devaluation strategies, this begs the question why the public has remained in favor of the common currency. In this article, we propose a theoretical mechanism that accounts for both voters’ pocketbook preferences and their sociotropic assessments over the noisy trade-offs associated with the outcomes of euro membership and euro exit. Using original survey data from three consecutive survey waves in Greece (conducted in July, September, and December 2015, respectively), we analyze the attitudes of Greek voters toward the euro in an environment of acute uncertainty, austerity, high unemployment, and economic recession. First, we juxtapose our uncertainty mechanism of popular euro attitudes against other explanations put forward in the literature and find strong support for our argument. Second, we conduct a survey experiment to tap into attitudes toward the euro-austerity trade-off and find that as uncertainty over policy outcomes diminishes, framing effects abate in significance, especially among those who voted No in the July 2015 referendum. Finally, we derive distinct sets of euro preferences for different ‘vulnerability profiles’. Over time, as the trade-offs of euro membership become more pronounced, we find a marked fall in euro support between July and December 2015.

The Backlash Against Globalization

“…Research has shown, for example, that individuals supporting referendum proposals that aim at retrenching political globalization often are overly optimistic about the consequences of such actions (Grynberg et al 2019, Sciarini et al 2015. Individuals' support for globalization-enabling or -restricting policies also depends on their evaluation of the risks and rewards associated with these policies and their risk orientation (Ehrlich & Maestas 2010, Jurado et al 2020, Steenbergen & Siczek 2017. A better understanding of where these expectations originate, how they are related to material and nonmaterial factors, and what happens when they are not fulfilled will expand our understanding of the dynamics that underlie the globalization backlash.…”

Strategic Interdependence and Preferences for Debt Mutualization in the Eurozone

“…Furthermore, domestic banks often hold a large quantity of local sovereign bonds, which would likely depreciate in case of exit, 50. Jurado et al 2020;Xezonakis andHartmann 2020. 51 E.g., Manasse 2019;Eichengreen 2010. leading to capital losses and, potentially, bankruptcies.…”

“…5. Clements, Nanou, andVerney 2014;Fernández-Albertos and Kuo 2016;Jurado et al 2020;Walter et al 2018. leverage of southern politicians in the negotiations. During the euro crisis, this combination created a strategic imbalance that allowed creditor countries to shift the burden of adjustment on debtor countries, 6 making any moves towards debt sharing unlikely.…”

Till austerity do us part? A survey experiment on support for the euro in Italy

“…One of the problems with this crisis resolution mechanism is that the austerity measures imposed on crisis countries are highly unpopular (Fernández-Albertos and Kuo, 2016, 2020; Franchino and Segatti, 2019; Jurado et al., 2020) and lead to electoral volatility, public protests, and the emergence of anti-system forces (Bojar et al., 2021; Bremer et al., 2020; Hübscher et al., 2020). Still, existing research shows that voters in most crisis-ridden countries strongly support the euro and are unwilling to leave it despite the costs associated with austerity (Clements et al., 2014; Hobolt and Wratil, 2015; Roth et al., 2016).…”