Varieties of capitalism, quality of government and the Eurozone crisis

• Robert Schuman Centre for Advanced Studies

The Political Economy Working Group welcomes Christos Paraskevopoulos as he presents his recent research.

Greece and Portugal are widely considered to be similar and comparable case studies of Southern Europe, characterised by centralised state structures and rather weak civil societies. Yet, increasing evidence over the last two decades points to significant variation in institutional and policy performance and adaptation capacity between the two countries.

This article, drawing on the Varieties of Capitalism (VoC) theoretical approach to comparative political economy and the institutional theory of Europeanisation, with emphasis on aspects of Quality of Government (QoG) and trust, concentrates on accounting for possible variation between Greece and Portugal in responses to MoU (Memorandum of Understanding)-based conditionality during the financial and economic crisis. It focuses on the areas of macroeconomic adjustment and structural reforms.

The empirical evidence vindicates the fundamental assumptions of the VoC approach about the impact of variation of economic performance among member states of the Eurozone according to their models of capitalism, in conjunction with fundamental weaknesses in the construction of the Euro. However, quality of government is identified as a key explanatory variable for variation in the adaptation capacity of Greece and Portugal, especially during the period of crisis. Additionally, there seems to be no evidence that cultural aspects can account for variation in adaptation performance between the two countries.