Intentional Laggards? Explaining New Member States' Eurozone Entry Strategies in the Pre- and Post-Crisis Landscape By Zsófia Murányi Submitted to Central European University Department of Political Science In partial fulfillment of the requirements for the degree of Masters of Arts Supervisor: Professor László Csaba CEU eTD Collection Budapest, Hungary 2014 Abstract In this thesis I set out to find the causal explanation for the puzzling variation in euro adoption strategies among the new member states of the European Union, specifically targeting the behaviour of the laggards. Building on the theoretical framework of rational choice institutionalism as utilized in the Europeanization literature, I hypothesize that while the domestic propensity (comprised of economic necessity and the actions of political actors) of a country serves as an independent variable, the country-specific influence of the EU-level institutions, conceptualized as institutional credibility and flexibility, is an important intervening variable affecting outcomes. In a comparative in-depth analysis focused on the cases of Poland and Hungary, with Slovakia as a contrasting case, I find significant evidence for the claim that the role played by international institutions is complex and has direct effects on how pre-euro-accession states come to view the accession process and the rules of EMU. In this way, the thesis represents an advancement upon the “domestic politics” approach which is most common in the theoretical paradigm. CEU eTD Collection i Acknowledgements First and foremost, I am grateful to my supervisor Professor László Csaba for his kind patience, encouragement, advice and comments on my work, as well as for his intense and instructive courses. I would also like to take the opportunity to thank Professor Carsten Schneider and Bruno de Paula Castanho e Silva for the Comparative Political Research class, where the idea for the project was born, and where I learned to ponder questions of research design. I could also not have prepared this work without the political economy courses of Professor Attila Fölsz, and I thank Professor Borbála Kovács for insightful comments during the thesis workshop. Lastly, I am also thankful to Dan Brett for a great talk at the eleventh hour, and to my debater friends in and outside of CEU, who have always kept my spirits high. This thesis is dedicated to G, who not only continues to tolerate my existence in a way I'll never quite deserve but has now managed to do so over the course of no fewer than three different periods of thesis-writing lunacy. CEU eTD Collection ii Table of Contents 1 Introduction.............................................................................................................................1 2 Theoretical Background..........................................................................................................4 2.1 General Overview of Theoretical Approaches to the Study of EMU..............................4 2.2 The New Institutionalisms and Rational Choice Institutionalism...................................8 2.3 Rational Choice Institutionalism and Europeanization.................................................11 2.4 Conclusion: Conceptualization, Measurement, Hypothesis and Case Selection...........13 3 The Pre-Crisis Years..............................................................................................................20 3.1 An Overview of EMU Institutions and Policy...............................................................20 3.2 Poland............................................................................................................................24 3.2.1 Macroeconomic Fundamentals..............................................................................24 3.2.2 Political Developments..........................................................................................25 3.3 Hungary.........................................................................................................................31 3.3.1 Macroeconomic Fundamentals..............................................................................31 3.3.2 Political Developments..........................................................................................32 3.4 Slovakia.........................................................................................................................37 3.4.1 Macroeconomic Fundamentals..............................................................................37 3.4.2 Political Developments..........................................................................................38 3.5 Conclusion.....................................................................................................................41 4 The Crisis Years.....................................................................................................................45 4.1 An Overview of EMU Institutions and Policy...............................................................45 4.2 Poland............................................................................................................................47 4.2.1 Macroeconomic Fundamentals..............................................................................47 4.2.2 Political Developments..........................................................................................48 4.3 Hungary.........................................................................................................................52 4.3.1 Macroeconomic Fundamentals..............................................................................52 4.3.2 Political Developments..........................................................................................53 4.4 Slovakia.........................................................................................................................57 4.4.1 Macroeconomic Fundamentals..............................................................................57 4.4.2 Political Developments..........................................................................................58 4.5 Conclusion.....................................................................................................................60 5 Conclusions...........................................................................................................................65 6 Appendix...............................................................................................................................68 7 References.............................................................................................................................72 CEU eTD Collection iii Index of Tables Table 1: Hypothesis..................................................................................................................17 Table 2: Year-on-year GDP growth, indicators on Maastricht convergence criteria and openness of the economy for Poland........................................................................................24 Table 3: Year-on-year GDP growth, indicators on Maastricht convergence criteria and openness of the economy for Hungary.....................................................................................31 Table 4: Year-on-year GDP growth, indicators on Maastricht convergence criteria and openness of the economy for Slovakia.....................................................................................37 Table 5: Year-on-year GDP growth, indicators on Maastricht convergence criteria and openness of the economy for Poland........................................................................................47 Table 6: Year-on-year GDP growth, indicators on Maastricht convergence criteria and openness of the economy for Hungary.....................................................................................52 Table 7: Year-on-year GDP growth, indicators on Maastricht convergence criteria and openness of the economy for Slovakia.....................................................................................57 Table 8: Poland: prime ministers, governing parties, finance ministers and central bank presidents..................................................................................................................................69 Table 9: Hungary: prime ministers, governing parties, finance ministers and central bank presidents..................................................................................................................................70 Table 10: Slovakia: prime ministers, governing parties, finance ministers and central bank presidents..................................................................................................................................71 CEU eTD Collection iv 1 Introduction After the largest ever enlargement round of the European Union in 2004-2007, the new member states, having no opt-out rights, all made a commitment to eventually participate in the third and final stage of Economic and Monetary Union. A derogation was necessary while the economies of the new member states caught up with those of the EU-15, but the new members, most of them countries of the former Eastern Bloc, expressed an overriding enthusiasm for early euro adoption. Much of the literature from around the time of accession focuses on economic and technical aspects of the best strategies for swift entry, certain in the underlying assumption that this was the goal of the new members. The benefits of joining, though