Title: Policies adopted under duress
Description: The present study proposes a model, termed the hybrid model, to explain fiscal-policy responses to financial crises. Although it is applied throughout the present study to the Eurozone, the model’s geographic and substantive scope apply more broadly. Combining and building upon past approaches, the hybrid model proposes three independent variables: partisanship, political capacity, and external actors. The model builds on the literature’s three dominant approaches: partisan, domestic approaches; approaches that emphasize convergence; and approaches that emphasize divergence, represented here primarily by the Varieties of Capitalism (VoC) literature. The hybrid model integrates the domestic emphasis of the partisan approach with the international emphases of the convergence and, to some extent, VoC approaches. The hybrid model builds on the domestic politics of the partisan approach by integrating coalition logic and the tension between coalition partners into the partisan approach’s political landscape.

The model also advances the convergence and VoC approaches by providing an explanation for variation in the pressure of financial markets, both over time and across countries, which mediates the influence of external actors in the domestic affairs of sample countries. In addition, with respect to the dependent variable, the present study develops a disaggregated measure that accounts for the diverse distributional implications of fiscal policies’ various dimensions. With respect to empirics, the present study employs a combination of quantitative and qualitative methods. Broadly, the large-N results provide support for the hybrid model, particularly as it pertains to partisanship. Event analyses and case studies support the role of external actors; the empirics show the degree to which financial-market pressure mediates the influence of external actors. Combined, the quantitative and qualitative approaches indicate problems with consonance, the particular dimension of political capacity considered in the present study.

Both quantitative and qualitative results reveal that consonance, i.e., between-party tensions in coalition governments, provides an incomplete characterization of the factors influencing the political capacity of single-party and coalition governments. The case studies suggest that within-party tensions and party-system strength, as additional measures of political capacity, play key roles in shaping fiscal-policy responses. The empirics also confirm the importance of disaggregating fiscal policy, the dependent variable, beyond the broad measures of fiscal deficit, expenditure, and revenue adopted in the present literature.