Voter Perceptions and Policy Legitimacy in the Euro Area

The Economic and Monetary Union (EMU) stands as a crucial pillar of European integration, providing member states with a common currency and an interconnected economic framework. However, the policies associated with EMU membership have raised important questions about the political and economic implications for both debtor and creditor nations. This dissertation seeks to answer the following central research question: How do the Economic and Monetary Union (EMU) membership and associated fiscal policies affect the political and economic outcomes of member states, and how do these outcomes influence public perceptions and support for the Union across different types of member states (creditor vs. debtor nations)?

The research will begin by defining legitimacy in the context of the EMU, where legitimacy is often framed in terms of both input legitimacy (democratic representation) and output legitimacy (the effectiveness of economic policies). While the EMU largely relies on output legitimacy, emphasizing economic stability, its technocratic governance model has faced significant criticism, particularly during economic crises. The dissertation will appraise how these legitimacy challenges manifest, focusing on the experiences of both debtor and creditor nations, and explores how input legitimacy might be strengthened to balance the democratic deficit in EMU governance.

The Eurozone crisis is a key moment in this exploration, as it exposed cracks in the EMU’s governance structure. The crisis highlighted how output legitimacy was insufficient in addressing national economic concerns, particularly in countries like Greece and Italy. The austerity measures imposed by the EMU and its institutions during the crisis exacerbated public dissatisfaction and contributed to the erosion of trust in the Union, especially in Greece, where perceptions of unfairness in the creditor-debtor relationship became central to the political debate.

This dissertation will then move on to analyzing the role of the European Stability Mechanism (ESM), which was created to provide financial assistance to distressed Eurozone countries. While essential for maintaining stability during crises, the ESM has been criticized for its intergovernmental nature—decisions made by finance ministers rather than the European Parliament. This lack of democratic accountability raises questions about its legitimacy. The dissertation will investigate how the ESM’s fiscal aid packages, often tied to austerity measures, have affected public perceptions in debtor countries, especially in Greece and Italy, where the social and political costs have been particularly high.

To address the question of how fiscal policies affect political and economic outcomes, the dissertation will apply the Synthetic Control Method (SCM), comparing creditor nations (e.g., Germany, Netherlands with debtor nations (e.g., Greece, Italy), as well as non-EMU countries (e.g., Sweden, Denmark). This analysis will assess political variables such as voter satisfaction, support for fiscal transfers, and the broader political consequences of the EMU's policies. By examining how fiscal policies shape political outcomes and public opinion, the dissertation will explore whether economic assistance or fiscal austerity policies strengthen or weaken public support for the EU.

The dissertation will also investigate the relationship between economic shocks—such as the 2008 financial crisis—and the shifting political landscape within the EMU. The hypothesis is that creditor nations may become more resistant to financial assistance when the costs of assisting debtor nations outweigh the perceived benefits of EMU membership. At the same time, debtor nations, burdened by austerity and high unemployment, may see a growing rift between national sovereignty and the EMU’s governance.

Lastly, the dissertation will place these findings within the global context, comparing the economic outcomes of EMU countries with those of non-EMU countries like Sweden and Denmark, which avoided the fiscal constraints of EMU membership. By examining how these countries have maintained economic stability independently of the Union, the research will question the necessity of EMU membership for long-term economic prosperity and explore whether non-member countries’ economic resilience during global crises diminishes the appeal of EU integration.

In conclusion, this dissertation aims to contribute new insights into the challenges facing the Economic and Monetary Union and its legitimacy. It will explore how EMU fiscal policies impact both the political and economic outcomes of its member states, particularly focusing on the contrasting experiences of creditor and debtor nations. By investigating how these policies influence public perceptions and support for the Union, this research will help clarify the future of European integration and the sustainability of the EMU’s governance model.