When the European Commission began pushing for the liberalisation of the telecommunications sector in the mid-1980s, EU Member States lacking the means and capacity to fuel an effective industrial policy faced an economic worry: Will their policies be enough to help key domestic telecommunications players survive the mergers and foreign acquisitions expected to unfold in the wake of European integration? In his article “The state strikes back: industrial policy, regulatory power and the divergent performance of Telefonica and Telecom Italia” published in the Journal of European Public Policy, Fabio Bulfone compares the fortunes of industrial policies implemented by the Italian and Spanish governments to aid the internationalisation of their main domestic telecommunications firms, Telecom Italia and Telefonica. Fabio explains why despite the similar styles of industrial policies pursued by Italy and Spain, Telefonica managed to transition from a monopolist focused on the Spanish market into a ‘European champion’, while Telecom Italia did not to follow the same trajectory. His analysis shows that the Italian government failed to convince key domestic investors of becoming the main shareholders of Telecom Italia during its liberalisation process. In Spain, on the other hand, the government was able to draw on the support of Spanish investors and “the strong hardcore of domestic banks created after privatisation gave Telefonica the ownership and managerial stability necessary to successfully expand abroad.”
By Tobias Wiß
Financialisation – the increasing reliance of society, the economy and politics on financial market solutions – has become a key feature of post-industrial economies. Pension reforms in recent decades reduced benefit levels of public pensions and expanded non-state – occupational and personal – pre-funded pensions, resulting not only in a process of privatisation but ultimately in the financialisation of pensions. As the result, pension policy is not only a social policy that affects retirement income, but also a financial one that impacts savings rates, corporate finance and, indirectly, corporate behaviour.
The first JEPP special issue in 2019 on “The political economy of pension financialisation: public policy responses to the crisis” edited by Anke Hassel and Tobias Wiß addresses how and why pension reforms came to rely more on financial markets and how public policy reacted to the financial crisis.
The collection of articles sheds light on pre-funded private pensions as one key component of financialisation, as they turn savings into investment via financial services providers. Public pension systems face financial pressures, resulting from ageing and rising public debt, while financial services are keen to move into the market of private pension provision. The financial crisis has triggered policy responses including shifts in investment strategies and also a re-assessment of the role of pre-funded private pensions as a complementary, rather than a superior, source of old-age income.
The special issue focusses on three main issues: The emergence of pension financialisation, reactions to financial crises and regulatory variation.
Politics and reform packages have mattered for the introduction of private pensions and especially minimum benefits in Germany. The overview of the historical development of pension financialisation in Denmark, the Netherlands and Sweden lays down how the social partners (trade unions and employer associations) managed to organise pre-funded pensions collectively allowing that financialised pensions serve social interests.
With regard to responses to financial crises, Germany, the Netherlands and the UK show processes of reinforcement instead of a weakening of pension financialisation.
A further set of articles looks more detailed at regulatory variation: The role of organised interests including adaptions of their strategies in times of financialisation, the influence of investment professionals promoting liability driven investment and the independent role of the state in shaping regulatory decisions. Apart from nation-states, the European Union does not promote a coherent pension financialisation agenda as one might expect. Instead, the EU’s pension strategy is rather accidental and multi-faceted, consisting of a mix of market creation, emulation and correction. In sum, it seems that pension financialisation and the broader financialisation of the economy are here to stay, despite negative developments during and after the financial crisis. Governments are quite aware that pre-funded pensions play a role for corporate finance, economic growth and financial markets in general.
The crises that have beset the EU in the past decade have provided plenty of opportunities for actors populating the EU’s political system to step up and assume political leadership. A product of the eurozone and sovereign debt crises, the Treaty on Stability, Coordination and Governance – or short, the Fiscal Compact – has been widely attributed to the political leadership of the German chancellor, Angela Merkel. However, these accounts have unfairly overlooked the critical role EU institutions have played in ensuring a swift passage of the Fiscal Compact, say Sandrino Smeets and Derek Beach. In their article “Political and instrumental leadership in major EU reforms. The role and influence of the EU institutions in setting-up the Fiscal Compact” published in the Journal of European Public Policy, Sandrino and Derek employ a process-tracing design to highlight the leadership of EU institutions, such as the Legal Service of the Council Secretariat. The findings of their analysis have wider implications for our understanding of how the European Council’s enhanced presence in EU decision-making has affected the role of EU institutions. Sandrino and Derek’s work suggests that “the informal and ‘isolated’ character of decision-making at the European Council level, paradoxically, created more instead of less dependence on EU institutions to translate the broad […] priorities [of Heads of State and Government] into actual reforms.”