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Euroscepticism in Times of Crisis

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Euroscepticism in Times of Crisis ERASMUS UNIVERSITY ROTTERDAM Erasmus School of Economics MASTER THESIS URBAN,PORT AND TRANSPORT ECONOMICS Euroscepticism in times of crisis Supervisor: Author: dr. Zhiling WANG Sanne RIJPKEMA (538766sr) Second Assessor: prof. dr. Frank VAN OORT Date Final Version: July 6, 2020 The views stated in this thesis are those of the author and not necessarily those of the supervisor, second assessor, Erasmus School of Economics or Erasmus University Rotterdam. Abstract Euroscepticism has moved from margins to mainstream over the past two decades. Different scholars have studied this phenomenon, however the reasons why the Euroscep- ticism perspective has been picked up by the general public are complex and not al- ways uniform. This study set out to address the role of the financial crisis in this trend. Interview-data from Eurobarometer and regional data from Eurostat are employed for the analysis. Through an event study and difference in difference model, it is studied whether the post-crisis attitude towards the European Union significantly differs from the pre-crisis trend. Moreover, three potential moderators of this effect are included to the model, be- ing economic prosperity, number of migrants in a region and whether the region received financial support after the crisis. The results indicate no significant change in attitudes as- sociated with the financial crisis. In addition, the first two moderators do not significantly moderate this effect, however support receiving regions are associated with higher levels of Euroscepticism. This implies potential discontent by citizens of the support programs. Whether a causal link between receiving financial support and higher levels of Euroscep- ticism is recommended for future research. 1 Contents 1 Introduction 4 2 Conceptual Framework 6 2.1 Euroscepticism: Definition and Structural Trend . .6 2.1.1 Definition of Euroscepticism . .6 2.1.2 Structural Trend of Euroscepticism . .8 2.2 Three main sources of Euroscepticism . .9 2.3 Euroscepticism and the financial crisis . 10 2.4 Hypothesis construction . 12 3 Data & Methodology 13 3.1 Data . 13 3.2 Dependent Variable . 13 3.2.1 Analysis of the Euroscepticism Trend . 14 3.3 Treatment operationalization . 16 3.4 Moderators of the treatment effect on EU-attitudes . 17 3.4.1 Economic Factor . 17 3.4.2 Cultural Factor . 18 3.4.3 European Support Factor . 18 3.5 Individual control variables . 19 3.6 Model Estimation . 20 3.6.1 Matching . 20 3.6.2 Event study . 21 3.6.3 Diff-in-Diff model . 21 4 Results 23 4.1 Matching . 23 4.2 Event study: analysing the pre-crisis trend . 25 4.3 Difference in difference model . 26 4.4 Robustness Checks . 29 4.4.1 Robustness check of the dependent variable . 29 4.4.2 Robustness check of the crisis start timing . 30 4.4.3 Robustness check of the regional dimension . 30 4.4.4 Robustness check of the crisis timing and regional dimension com- bined . 31 5 Discussion 32 6 Conclusion 34 7 Bibliography 35 2 8 Appendices 38 8.1 Appendix 1: Descriptive Statistics . 38 8.2 Robustness check of the dependent variable . 41 8.3 Robustness check of the crisis start timing . 44 8.4 Robustness check of the regional dimension . 47 8.5 Robustness check of the crisis timing and regional dimension combined . 50 3 1 Introduction Over the past two decades, Euroscepticism has moved from margins to mainstream (Ush- erwood & Startin, 2013). Critical opinions with regards to the European Union (EU) as an institution and the European integration project have been picked up by the general public. The perspective of Euroscepticism has existed ever since the European Union was established, however the size and scope of this view have grown over time. The reason more people take this view is not always clear and uniform (Hooghe & Marks, 2007). For some, the economic threats associated with the enlargement of the free market are reasons to be sceptical about this integration project. For others, the perceived loss of one’s own identity as a result of growing migration flows is a trigger to be sceptical about the European Union. A potential additional reason for the rise in Euroscepticism is that Europe has been subject to different crises during the past two decades. The structural trend of increased levels of Euroscepticism is probably shaped and affected by the occurrence of these crises (Kneuer, 2018). This idea in mind, the central question in this thesis is to investigate how attitudes towards the European Union have changed as a result of the financial crisis. Additionally, it will be studied which sources of Euroscepticism are significant driving factors of this change in attitude. The reason the financial crisis is of interest for this study, is because the European Union played an important role in the aftermath of this crisis, during which several EU-member states experienced sovereign debt problems. The main research question will contribute to the strand of literature that aims at pro- viding insights on how crises influence the attitudes towards the European Union. The follow up research question will deepen the understanding on the specific sources that are significant drivers of changes in attitudes. Answering these two questions can help in un- derstanding the development of Euroscepticism over time, and subsequently contribute in constructing predictions on how future European crises might shape attitudes. This will be especially relevant for policy-making at the level of the European Union. Examples of policy-making that is served with a deeper understanding of the effect of the crisis on EU-attitudes, is policy regarding financial support programs in the aftermath of a crisis, or more general, policy-making with regards to the integration project itself. This paper uses a data set consisting of 2005 to 2014 NUTS 2 level regional data from Eurostat and individual interview data of EU-citizens from the Eurobarometer. Through an event study and difference-in-difference modelling, it is investigated whether the fi- nancial crisis has significantly changed attitudes towards the European Union. The na- ture of analysis enables to identify whether a causal linkage exists between a change in EU-attitudes and the financial crisis. No previously conducted research has been able to analyse this, hence this study is leading in this respect. The main findings are the following. While the analysis provides no proof for any significant causal effect of the financial crisis in the development of attitudes towards the EU, the results do indicate some discontentment by individuals living in regions being 4 affected by the crisis while receiving support by the EU. The paper is structured in the following manner. In section 2, a conceptual frame- work is constructed. Section 3 deals with the methodology. In section 4, the results of the analysis are presented. Section 5 is concerned with discussing the results and providing implications. Lastly, section 6 presents the overall conclusions. 5 2 Conceptual Framework Throughout this section, the concept of Euroscepticism and dynamics of this phenomenon are reviewed. Moreover, the already available knowledge concerning the relationship between Euroscepticism and the financial crisis are presented. These different elements form the basis for the empirical analysis. In the last subsection the hypothesis and sub- hypotheses are presented. 2.1 Euroscepticism: Definition and Structural Trend 2.1.1 Definition of Euroscepticism In the accumulated literature for the purpose of this study, the concept of Euroscepticism is described and defined in various ways. Different types of Euroscepticism are introduced and used for analysing trends, sources and effects. Throughout this section, a clear-cut definition for Euroscepticism is put forward, as well as the specification of which type of Euroscepticism is the subject of analysis for this thesis. According to the Oxford dictionary, a Eurosceptic is described as “A person who is op- posed to increasing powers of the European Union”. The term scepticism is defined as “an attitude of doubt or disposition of disbelief”. Euroscepticism therefore specifically refers to scepticism with regards to the European Integration or Europe as a whole (Hooghe & Marks, 2007). The term first appeared in print in the Economist in 1992, according to the Oxford English Dictionary (Hooghe & Marks, 2007). The most common definition for Euroscepticism was introduced in 1998 by Taggart. Specifically, party-based Euroscepticism ‘expresses the idea of contingent, or qualified op- position, as well as incorporating outright and unqualified opposition to the process of Eu- ropean integration’ (Taggart, 1998). As mentioned by Flood (2002), the Eurosceptic view should not be confused with reformist positions that are critical on particular aspects of the EU, but are on average sympathetic towards the aims and achievements of integration, hereby accepting the process of further European integration. In later publications, this conceptualisation of Euroscepticism by Taggart (1998) is fur- ther developed in two categories, “soft” and “hard” Euroscepticism (Taggart & Szczerbiak, 2001). The following distinction is denoted: “Hard Euroscepticism implies outright rejec- tion of the entire project of European political and economic integration and opposition to their country joining or remaining members of the EU” (Taggart & Szczerbiak, 2001, p. 9). Alternatively, “soft Euroscepticism involves contingent or qualified opposition to European integration” (Taggart & Szczerbiak, 2001, p. 10). Of this last category, a conceptual weakness can be indicated, as the term for soft Eu- roscepticism can be regarded as being too broad (Krouwel & Abts, 2007). An alternative way of viewing Euroscepticism is as one out of four ideal types of support or opposition of the European Union (Kopecky´ & Mudde, 2002). Two dimensions lead to a matrix of four categories of party positions. These dimensions distinguish between diffuse and specific support for European integration. 6 Yet, the given two conceptual frameworks for specifying types of Euroscepticism are incomplete, and therefore there is need for another defining framework to paint the big- ger picture.
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