Rachel A. Epstein

Beyond conditionality: international institutions in postcommunist Europe after enlargement

According to the dominant incentive-based explanation, European Union (EU) conditionality has been particularly effective when the EU offered a credible membership incentive and when incumbent governments did not consider the domestic costs of compliance threatening to their hold on power. However, after the EUs eastern enlargement the influence of international institutions could then be expected to decrease in three different contexts: (i) the new member states after accession; (ii) the current candidate countries; and (iii) the postcommunist countries in the European neighbourhood policy. Yet although the incentive-based explanation receives support in some issue areas, in others, external influence is more enduring than predicted. To the extent that our understanding of the power of incentives is complicated by post-enlargement findings, there are new avenues for research into the full range of mechanisms that international institutions have at their disposal for influencing target states.

Nato Enlargement and the Spread of Democracy: Evidence and Expectations

The second enlargement of the North Atlantic Treaty Organization (NATO) since the end of the cold war fueled an ongoing debate over whether the alliance contributes to democratization in Europe. In the 1990s, critics warned that the 1999 NATO enlargement would cultivate a new cold war and prove irrelevant to democratic consolidation in central Europe. Events have not borne out these forecasts, however. In Poland, not only did NATO build a civilian consensus in favor of democratic control over the armed forces corresponding to NATO norms, but it also delegitimized Polish arguments for defense self-sufficiency that had derived their credibility from Polands experience of military vulnerability and foreign domination. Such democratizing and denationalizing trends have contributed to stability in postcommunist Europe. An assessment of the seven states that joined in 2004 similarly reveals some scope for NATOs influence in all cases. The alliances access to domestic reform processes, however, will be uneven across cases in ways largely consistent with the predictions of the theoretical framework in this article. Rachel A. Epstein is assistant professor at the Graduate School of International Studies at the University of Denver.

The political dynamics behind Europe’s new banking union

Abstract This article examines the political dynamics behind Europe’s new banking union in two stages. First it examines the accretion of political power to two European institutions – the European Commission and the European Central Bank (ECB) – during the financial crisis, emphasising the ways in which the European Central Bank (especially under Mario Draghi) altered the relationship between principals and agents in the European institutional architecture. Second, it process-traces the policy conflicts and compromises that led to a Europeanisation and centralisation of bank supervision, recapitalisation, recovery and resolution in a remarkably short two years – a transfer in sovereignty to the supranational level equal to that involved in the creation of Economic and Monetary Union. The article argues, contrary to other analyses that stress the intergovernmental nature of the process and the bargains concluded, that the emergence of banking union reflected something of a neo-functionalist logic whereby supranational actors successfully interpreted the crisis as requiring supranational solutions, and shaped the outcomes in the face of sometimes fierce member state opposition.

When do foreign banks 'cut and run'? Evidence from west European bailouts and east European markets

ABSTRACT Very high levels of foreign bank ownership in central and eastern Europe (CEE) gave rise to fears that the region would be vulnerable to ‘cutting and running’ during a financial crisis, whereby western parent banks would repatriate capital and liquidity to their home markets and abandon their CEE clients. Such fears were compounded by the economic nationalism of late 2008 and early 2009 in western Europe, as well as by west European bank bailout programmes that privileged home markets over foreign ones. Although CEE experienced a severe credit crunch in late 2008, compared to other financial and economic crises, western bank behaviour in CEE has not amounted to ‘cutting and running’. While many experts credit the ‘Vienna Initiative’ for maintaining foreign bank exposures in the region, this paper argues instead that it was the deep form of financial integration to which CEE was subject that kept banks committed. Specifically, western banks’ ‘second home market’ business model, in which capital moved east via foreign-owned bank subsidiaries as opposed to primarily via branches or cross-border lending, led to only moderate retrenchment from CEE.

Cultivating Consensus and Creating Conflict International Institutions and the (De)Politicization of Economic Policy in Postcommunist Europe

In Central and Eastern Europe, economic reform consistent with Bretton Woods and European Union (EU) demands has replicated not only the rules and institutions that prevail in Western societies but also their patterns of consensus and conflict. Although central bank policy has been largely depoliticized in the 2004 accession states through the institutionalization of central bank independence, agricultural interests were mobilized—in some instances against the EU—in the course of accession negotiations. This article argues that as they engage in the explicit transfer of economic policy to post-communist states, international institutions simultaneously transmit beliefs about who has legitimate claims on the state. The methods through which international institutions help construct new markets in transition states have consequences for the development of domestic cleavages and for the cultivation of political support for economic integration.

Assets or liabilities? The politics of bank ownership

ABSTRACT By 2014, there was significant variation across the global economy in the levels of domestic and foreign bank ownership among states. While major emerging and most advanced countries continued to protect domestic control over the bulk of their banking assets, a number of developing and transition economies had opened their banking markets to unprecedentedly high levels of foreign bank ownership. This introduction to a special issue on the politics of bank ownership examines why states have taken such divergent paths, and maps out some of the major consequences of disparate foreign bank ownership levels. The special issue finds that banking sector protectionism against a backdrop of globalization has generated new conflicts and costs for states. Paradoxically, it is the large, powerful countries that are most susceptible to such costs and conflict, in contrast to their more open, if weaker, counterparts. In addition, we find that high levels of foreign bank ownership have not resulted in significant vulnerability for host states, as some scholars had predicted. In some cases, foreign bank ownership can even improve a weak states power position. Finally, we conclude that states’ varying approaches to banking sector protectionism and openness complicate efforts to supranationalize bank regulation and supervision, exacerbating financial instability.

When Legacies Meet Policies: NATO and the Refashioning of Polish Military Tradition

Polish military tradition has long revolved around the ideal of defending the country’s territorial, political, and cultural integrity. Given Poland’s history of partition, occupation, and foreign domination, however, the institutionalization of democratically accountable civilian control over the armed forces had never been an objective, let alone a reality. Thus, when the North Atlantic Treaty Organization committed to expanding its membership in the mid-1990s, there was a notable clash of Polish military legacies on one hand and NATO’s proposed policies on the other. In analyzing the interaction between domestic traditions and international pressure, the author argues that NATO greatly accelerated the consolidation of democratic civilian control in Poland. By removing key elements of Polish military tradition from both the rhetoric and practice of Polish public policy, the alliance had the practical effect of cultivating a civilian interest in far-reaching oversight while undermining the preexisting societal consensus in Poland that had long brooked high levels of military political authority.

International Political Economy meets the unexpected: Brexit, Trump and global populism

The June 2016 Brexit vote and November 2016 Trump election have posed renewed challenges to IPE Theory, as unexpected events which have highlighted the need for theoretical reflection and engagement. In light of these and other events, we, on the RIPE editorial board, saw the need for a ‘taking stock’ of IPE Theory. Building on RIPE’s longstanding tradition of pluralistic, pragmatic scholarship, we approached a number of leading thinkers in the field with a set of core questions, to enable a critical analysis of the ‘state of the art.’ We asked scholars identified with approaches spanning Open Economy Politics, Constructivism, the New Interdependence Approach, Critical Feminist Political Economy, and Discursive Institutionalism to address three broad questions:

From governance to government: Banking union, capital markets union and the new EU:

European banking union and Capital markets union have emerged as two of the key pillars of European integration since the post-2008 financial crisis. Neither were anticipated prior to the financial crisis, nor was the rapidity of their construction. Both imply the same critical shifts in Europe’s institutional political economy. The first relocates national oversight and authority to supranational institutions (a political shift), while the second increases the power and responsibility of market actors by reducing national controls (an economic shift). If banking union aims to break the hold of national governments over banking entities to foster a less fragmented and more efficient European union banking market, capital markets union aims to remove national-level impediments to a single market for capital in which jurisdictional differences are minimized, investor freedoms maximized and business gains access to a greater range of financial resources.