Use this URL to cite or link to this record in EThOS:
Title: The evolution of Europe's financial stability agenda
Author: Maggs, George
ISNI:       0000 0004 9351 0930
Awarding Body: University of the West of England
Current Institution: University of the West of England, Bristol
Date of Award: 2019
Availability of Full Text:
Access from EThOS:
Access from Institution:
This thesis applies insights from Historical (HI) and Discursive Institutionalism (DI) to analyse the evolution of Europe's financial stability agenda from the signing of the Maastricht Treaty (1992) to the completion of Banking Union (BU) (2014). It aims to discover when and under what circumstances ideas have enabled and constrained important policy shifts within the Eurosystem, and to what extent structural rigidities have prevented change. The thesis fills three gaps in the literature: i) no previous research has attempted to analyse the importance of ideas and structures on the development of financial stability policy within the Eurosystem. ii) it provides an ideational explanation for the growing supranationalisation of financial policy within the European Union (EU). In line with monetarist ideas, financial integration was promoted by the EU Commission and ECB as a means of harmonising financial conditions and improving monetary policy transmission within an increasingly 'market-based' financial environment. Yet as a result of this enhanced interconnection, it soon became clear that the ECB would need to become concerned not only with the delivery of price stability, but of financial stability too; iii) at the national level, little research has been produced on the relationship between national economic ideas, the regulation of domestic financial sectors, and how member-states prepared for EMU. This thesis shows why Spanish and German banks managed market-based financial trends dissimilarly, why the financial crisis affected the two countries differently, and why they subsequently expressed different policy preferences at the EU-level. 'Process tracing' is used as the overarching methodological framework, attributing causation to specific events and trends. Using this framework, the thesis adopts a comparative analysis of the Spanish and German financial systems. In total, 19 qualitative interviews were conducted with Spanish, German and European policymakers to gain a deeper understanding of the ideational and structural issues at play within each jurisdiction, as well as a thorough analysis of important speeches and policy documents drafted by national and European central bankers. Critical Discourse Analysis (CDA) was then used in conjunction with process tracing to examine text and data and to scrutinise policy-makers justifications for action or inaction. The thesis uncovers clear examples of where ideas have acted both as enablers and constrainers of change, and where structures have dominated outcomes. One of the most important findings is that ideational contradictions or failures can lead to substantial institutional change. This occurred most notably during the 2010-12 sovereign debt crisis which revealed the inherent contradictions of the Maastricht framework. As the crisis intensified, the ECB realised that if price stability was to be maintained, interventionist financial policies would become necessary, leading to considerable conceptual stretching over what should constitute ECB monetary policy. Ideas were also shown to have influenced the structure of the German and Spanish financial systems and the way they were impacted by the crash. In Germany, Deutsche Bundesbank (DB) non-interventionist policy ideas allowed financial institutions to accumulate asset-side risk, resulting in the crisis hitting Germany early in 2007. However, the liberalisation of German debt markets in the 1990s meant German sovereign bonds became viewed as 'safe assets' during the downturn, allowing the German state to borrow to bail-out its financial sector. In Spain meanwhile, BdE interventionist financial policy ideas facilitated important countercyclical practices which cushioned the initial crisis. But because Spanish banks relied on the production of Asset-Backed Securities (ABS) rather than inter-bank 'repo' markets for funding, Spanish bonds were not considered to have the same pedigree as German debt. Consequently, once the sovereign debt crisis took hold, Spain was forced to turn to Europe for support. Different financial ideas and regulatory practices within the DB and BdE thus had a considerable influence on the severity and timing of the crisis in each country. This research also reveals that ideas acted as powerful constraints. From the 'institutional formation' of EMU at Maastricht which established price stability as the raison d'être for the existence of the ECB, the banks legitimacy and credibility became entwined with the successful implementation of monetarist policies. This restricted the scope of policy ideas aimed at improving financial stability, particularly before 2012.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available