Power, ideas, and national preferences: Ireland and the FTT

Abstract

European countries have been required to formulate a national preference in relation to the EU Financial Transaction Tax. The two leading approaches to explaining how the financial sector makes its views felt in the political process the structural power of the financial services sector based on potential disinvestment, and its instrumental power arising from direct political lobbyingfall short of providing a comprehensive account. The missing link is how and why policy-makers might be willing to adopt the priorities of key sectors of the financial services industry. We outline how three levels of ideational power might be at work in shaping outcomes, using Ireland as a case study. We argue that background systems of shared knowledge that are institutionalised in policy networks generated broad ideational convergence between the financial sector and policymakers, creating a policy paradigm over the priorities of industrial policy in general. Against that backdrop, debate over specific policy choices (policy instruments and policy settings) can leave room for a wider range of disagreement and indeed political and ideational contestation. Irish policymakers proved responsive to industry interests in the case of the FTT, but not for the reasons normally given.

Beliefs of political leaders: conditions for change in the Eurozone crisis

“…These findings warrant the expectation that an increase in Euroscepticism may affect a political leaders' beliefs, as they may feel under pressure to change their beliefs depending on their constituents' mood. This condition is important to consider in this study, as the impact of the economic crisis extended into a political crisis, and, as such, it threatened the legitimacy of the European Union (Hall 2014). Second, economic performance, namely employment and public debt, may also significantly account for leaders' belief changes.…”

“…The first criterion is variation in terms of varieties of capitalism. Hall (2014) argues that countries with a focus on demand-led growth models have faced more negative distributive consequences from the Economic and Monetary Union than countries with a focus on export-led growth models, and, as such, these countries are more likely to face economic pressure in a crisis. The second criterion is variation in terms of Eurozone membership.…”

European Financial Governance: FTT Reform, Controversies and Governments’ Responsiveness

“…Kenny expressed the target premise of "continuing to adopt, articulate and implement a clear vision for the future of the IFSC and demonstrating Ireland's commitment to the promotion and growth of this sector" (Houses of the Oireachtas, 2012a). This target premise of the Irish government, by focusing on promoting the national economy, contrasts with the German and French stances, bearing in mind that Ireland also opposed the FTT due to the UK's resistance (Hardiman & Metinsoy, 2019).…”

“…The FTT, as an instrument of regulating the financial market, will have an influence on the banking sector in the EU in particular, and shape the overall outcome of the banking union (Högenauer, 2021). It was disapproved by Ireland (Hardiman & Metinsoy, 2019) clashing with favorable German and French stances (van Loon, in press). Consensus and desirability for financial regulation reform have thus, at times, been severely constrained.…”

“…Whereas some studies put the positions of member states at center stage in explaining Euro crisis decision making (Degner & Leuffen, 2019a;Schoeller, 2018), other research involves positions of member governments in EMU reform, whereby these largely reflect single country case studies on France (Rothacher, 2015), Germany (Degner & Leuffen, 2019b), Italy (Bull, 2018), Ireland (Hardiman & Metinsoy, 2019) or the UK (Kassim, James, Warren, & Hargreaves Heap, 2020). These studies examine whether governments' preferences are mainly determined by so-called structural economic factors or by political considerations (Tarlea, Bailer, & Degner, 2019), or by a "battle of the systems" and a "battle of ideas" (Van der Veer & Haverland, 2019, p. 1399.…”