The Domestic Politics of International Cooperation in the Eurocrisis
June, 2014
Abstract
How does the interaction between domestic politics and international negotiations in a highly institutionalized environment affect Eurozone governments' decisions to agree to coordinated financial bailouts? We use a game-theoretic model to analyze the conditions under which EU governments are likely to provide bailouts, delay bailouts, or shift the burden of the bailout to other Eurozone countries. We find that EU governments that stand to receive the greatest benefits from financial rescues of crises face the greatest obstacles to implementing coordinated financial bailouts whenever these actions must take place prior to domestic elections. We establish conditions under which greater preference heterogeneity of Eurozone members can increase cooperation on financial bailouts instead of decreasing it.Keywords:
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