Too Fragile to Succeed? Electoral Fragility, Austerity and Economic Confidence (Pre-Recorded)

• In Event: Economic Attitudes and Perceptions

Abstract

In the wake of the Great Recession, European governments implemented harsh fiscal austerity measures to restore economic confidence. However, the economic success of these policies varied significantly. This raises the question of whether and under what conditions austerity is an effective policy strategy to restore economic stability. This study shows that the impact of austerity on economic confidence is conditioned by an important political factor, namely the electoral strength of the government. Our macro-level time series analysis tracks the impact of austerity announcements on economic confidence over time in 15 European countries during the Great Recession, showing that austerity leads to a decrease in economic confidence. However, the negative impact is substantially smaller when austerity is announced by an electorally strong government vis-à-vis a fragile one. Our individual-level survey experiment with a total of 7,500 respondents in France, Germany, Italy, the Netherlands and Spain indicates that the negative effects of spending cuts on both pocketbook and sociotropic concerns are particularly pronounced when austerity policies are announced by governments that are losing electoral support. Austerity, therefore, is perceived as more credible and effective when carried out by electorally strong governments compared to weak ones.

Authors

• Chendi Wang, European University Institute

• Federico Maria Ferrara, London School of Economics and Political Science

• Thomas Sattler, University of Geneva