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How much leeway did governments have in designing bank bailouts and deciding on the height of intervention during the 2007-2009 financial crisis? This paper analyzes comparatively what explains government responses to banking crises. Why does the type of intervention during financial crises vary to such a great extent across countries? By analyzing the variety of bailouts in Europe and North America, we will show that the strategies governments use to cope with the instability of financial markets does not depend on economic conditions alone.
Rather, they take root in the institutional and political setting of each country and vary in particular according to the different types of business-government relations banks were able to entertain with public decision-makers. Still, “crony capitalism” accounts overstate the role of bank lobbying. With four case studies of the Irish, Danish, British and French bank bailout, we show that countries with close one-on-one relationships between policy-makers and bank management tended to develop unbalanced bailout packages, while countries where banks have strong interbank ties and collective negotiation capacity were able to develop solutions with a greater burden sharing from private institutions.
How much leeway did governments have in designing bank bailouts and deciding on the height of intervention during the 2007-2009 financial crisis? By analyzing the variety of bailouts in Europe and North America, we will show that the strategies governments use to cope with the instability of financial markets does not depend on economic conditions alone. Rather, they take root in the institutional and political setting of each country and vary in particular according to the different types of business–government relations banks were able to entertain with public decision makers. Still, “crony capitalism” accounts overstate the role of bank lobbying. With four case studies of the Irish, Danish, British, and French bank bailout, we show that countries with close one-on-one relationships between policy makers and bank management tended to develop unbalanced bailout packages, while countries where banks negotiated collectively developed solutions with a greater burden-sharing from private institutions.
Why did the services directive proposed by Internal Market Commissioner Frits Bolkestein lead to such virulent reactions in France? This article examines several potential explanations focusing on political economy, public opinion and the timing of events. While all of these elements contribute to the difficult political context, they are insufficient to explain the importance of the backlash against the directive in France. We therefore focus on party politics and argue that political elites had an interest in exploiting the directive in the context of a leadership crisis within the French socialist party. The case study bears lessons about the domestic potency of European policy issues: they can pose a real challenge to centrist parties, which have insufficiently addressed them in their party platforms.