Societal Foundations of European Policy Divergence in Financial Governance

EU member states frequently disagree over the management of financial crises, both regionally in the Eurozone and globally in the G20 despite decades of European integration, institution-building, and commitments to joint action. Mainstream integration theories of neofunctional institutionalism and liberal intergovernmentalism cannot sufficiently explain this puzzle of persistent European policy divergence on financial governance. I argue that the policy divergences can only be understood by analysing the societal foundations of governmental positions with the societal approach to governmental preference formation. The societal approach focusses on domestic societal ideas and material interests as explanatory variables for governmental positions. Regarding European policy divergence, I argue that both the coordination problems in the Eurozone and the European policy divergence in the G20 reflect the heterogeneity of domestic societal influences on member state governments. These arguments are empirically evidenced in case studies on the management of the Eurozone crisis and on Europe's role in the governance of the global financial crisis in the G20