'Moral hazard' and the politics of European economic governance

• Robert Schuman Centre for Advanced Studies
• Department of Political and Social Sciences

In this seminar, Max Weber Fellow Laura Pierret explores the concept of moral hazard and its influence on the institutional arrangements and public policies of the European Union.

In this event, Max Weber Fellow Laura Pierret will tackle her latest research on the concept of 'moral hazard' and its influence on the institutional arrangements and public policies of the European Union.

The objective of avoiding moral hazard acquired political power in the EU and was notably wielded to justify the delay of financial assistance to countries in distress during the financial crisis of 2007-9, the rejection of debt mutualisation, or the imposition of austerity. Despite the negative implications of these policy choices in terms of social welfare and social fairness, and that moral hazard is in the realm of empirical uncertainty, little academic attention has been devoted to the politics of moral hazard’s use in the EU.

The seminar aims to explain why an uncertain phenomenon, with costly counter mechanisms, has become an important component of policy. The thesis defended is that the political power of moral hazard in the post-2007 European economic governance lies in the minor contestation of moral hazard-based arguments; the justification of minor contestation is primarily a question of the usefulness of the concept rather than ideational consensus. 

Among other things, the findings of this research draw attention to the role of non-authoritative actors in the political influence of ideas that should be subject to more contestation and to the leadership role of economic experts in eventually changing the conventional wisdom.