My lectio praecursoria in my PhD defense in June 2024. It has been also published in Finnish in Poliittinen talous.

This dissertation titled “Power of Experts in the EU: Birth of the Troika and Resilience of the EMU paradigm in the European debt crisis of 2010” examines the power of experts in crisis decision-making.

I start with a quote that highlights this power of experts. A Commission official who was negotiating the first Greek loan described the process to me:

This is very much based on analysis and what surprises me is the quite enormous power of civil servants in this kind of situation, in the context of a programme. In practice, there are not many people in this hierarchy of institutions who would understand a lot about these issues, neither in the Eurogroup nor elsewhere […]. What the experts put in this kind of a document goes through quite directly. And, okay, we are technocrats, we have the world’s best expertise, […] but it is, frankly, quite scary how much power is wielded by an individual representative of the institution deciding on these things. Okay, it says that it is done with the [national] officials and it is their Memorandum of Understanding and they have to sign it, so it is not… […] Okay, I have around me the institution and the hierarchy who accept these, but I would say that the power of a single official is quite important in this sort of a situation.

The quote also points out the power of individuals in politics. Before the PhD, I used to work in politics for 10 years and I have acted myself in political positions for 18 years. During those years, I was amazed by how much power lobbying, but also in general individuals and their beliefs, and especially their knowledge, have in politics. This research is based on my urge to understand more thoroughly whose voice and ideas are heard in decisions, in this case the eurozone crisis decision-making. That crisis, in my view, is the most important event that has influenced Europeans in recent years.

We know from research that the eurozone crisis which lasted from late 2009 to at least 2015 was a period of austerity policy in Europe, meaning budget cuts, especially in the southern EU member states. We also know from research that ideas have power in politics. I regard ideas as cognitive beliefs that relate one thing to another and guide our actions and attitudes. A paradigm is a general background framework of ideas, taken for granted but fundamentally affecting attitudes and actions by a) defining the nature of reality, problems, causes, effects and goals and instruments to reach them; and especially b) limiting alternatives. I call the EU’s economic policy paradigm the ordoliberal EMU paradigm, as the European Economy and Monetary Union, the EMU, is influenced by ordoliberalism. Ordoliberalism is an early subcategory of European neoliberalism. I define, based on previous research, that the ordoliberal EMU paradigm, enshrined in the Maastricht Treaty, approaches, as ordoliberalism, the economy as ideal and believes in free markets but as not self-regulating and thus needing to be governed by the state and an independent central bank, for example to avoid monopolies, enhance competition and safeguard price stability. It also believes that economic growth leads to convergence, but disbelieves in democratic management of the economy as it results in overspending. Thus, fiscal discipline, austerity and balanced budgets have to be guaranteed by rules, epitomised in the EU’s fiscal rules laid down in the Stability and Growth Pact.

What we don’t know exactly is who upholds this EMU paradigm. I was very curious to understand why the existing EU economic paradigm, the ordoliberal EMU paradigm, did not change during the crisis. This is the research puzzle of my study. A crisis occurs when a period of instability that has reached its critical phase, with decisive change ahead that offers possibilities for the transformation of the earlier policies. Indeed, the word crisis is of Greek origin and can be seen as a turning point at which a patient gets better or worse. Thus, a crisis can be a possibility of change. The eurozone crisis was preceded by the global financial crisis starting in 2007 that resulted in stimulus policies and criticism of mainstream economic thinking in 2008–2009. Furthermore, previous major economic crises have resulted in a paradigm change, such as the 70’s oil crisis and the turn to neoliberalism. Also, theories, such as the punctuated equilibrium and incremental change models, suggest that a crisis induces change, abrupt or incremental, in paradigms. However, in 2010, the European decision-makers with the first Greek loan programme and the European Financial Stability Facility (EFSF) returned to austerity, and the EMU paradigm was reinforced during the whole eurozone crisis, not questioned. My research started from being puzzled: Why is this, why was there no change in thinking? Isn’t a crisis proof that previous policies have failed?

Thus, I wanted to know what and who prevented this potential change and made the EMU paradigm this resilient. Based on the power of ideas research, where I situate in discursive institutionalism and ideas and politics focus, I outlined a hypothesis:

I assumed that a major cause for the non-change of the paradigm (outcome) is the absence of alternative ideas entering the decision-making process (cause) that could have led to a change. These are presented in the figure behind me. Furthermore, I presumed that experts are a crucial way for ideas to enter the decision-making process. Consequently, my actual hypothesis is a causal mechanism linking the cause and effect in which the experts who were consulted in the process did not suggest other alternatives that were present at the time. In other words, my hypothesis is that the lack of alternatives by consulted experts was one major reason for the stability of the EMU paradigm. In order to test this hypothesis about the causal mechanism, my empirical (mechanism-centred) research questions were as follows:

-RQ1: On which expert knowledge and experts did the EU decision-makers in the European Commission and the Council and Germany rely when deciding on the Greek Loan Facility, the First Economic Adjustment Programme for Greece and the EFSF in 2010?
-RQ2: What kind of reality did the content of this expertise construct, which thereby constrained the decision-making?
-RQ3: How did the policymakers and officials use this expertise in decision-making?
-RQ4: What kind of constraints were there on the use of (alternative) expert knowledge in the decision-making process?

Why focus on 2010 and especially its spring? I don’t expect a paradigm to change overnight, but I argue that 2010 was a formative moment that blocked any later paradigm changes. As said, the first Greek loan and the EFSF meant that the crisis was tackled with a return to fiscal consolidation from earlier stimulus measures. They also created path dependency as in the next bailouts the same organisational structure and austerity focus were followed. In 2010, the Troika, consisting of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), was formed to manage the crisis. Surprisingly, these crucial events have not been previously traced in a detailed academic manner. Thus, my dissertation provides the first detailed account of the Troika formation.

My dissertation is a single case study of decision-making in a major economic crisis. I apply case study and theory-testing process tracing methodology. Information on the power of experts was very difficult to find, as the decision-making was done behind closed doors in organs that do not share their documents. Therefore, I conducted interviews with 133 interviewees, including the then Commissioner, Commission President and European Council President. The interviews, together with official EU and German documents, were analysed with grounded-theory–inspired, theory-oriented qualitative content analysis and discourse analysis. The data was extensive, I had more than 3,000 pages of interview data, a difficult amount to handle. My data also covered the Six-Pack Regulation and fiscal stimulus decision-making that acted as shadow cases.

In short, my analysis confirmed the causal mechanism. The consulted experts did not offer alternatives and their expertise influenced the Greek loan and the EFSF, thus preventing a paradigm change. In case study and process tracing language, I found reliable and often unique evidence that fitted the observable implications of the hypothesis: in other words, the expected empirical manifestations of the three parts of the causal mechanism. Thus, the posterior possibility of the hypothesis of the causal mechanism was strengthened. However, the results are more nuanced than this. Firstly, I thought I was studying lobbying, influecing from outside the EU institutions. It was not a surprise to find that the decision-maker circle was small and closed, but very interestingly this applied to expertise as well. Only in-house expertise, from the Troika institutions, was used in the process. According to my data, lobbyists were not a major factor. One can assume that a closed circle is not conducive to change.

The eurozone crisis has been depicted as a show of big EU member states. However, this is just the surface. I witnessed the benefit of a detailed empirical analysis, as I started to understand that the process had to be divided in three parts. It is only in the first initial intergovernmental process where Germany’s Finance Ministry and Chancellery, European Council, Eurogroup and the Eurogroup working group ruled and in the EFSF case the Ecofin, the Council of Finance Ministers. That process was about whether to adopt the EFSF and grant a loan to Greece and should it be conditional. The other two processes were actually more crucial from the point of view of whether experts could have promoted a paradigm change. The Greek Loan Facility and EFSF modalities were decided in the Task Force for Coordinated Action, composed of member state and Commission officials; an organ not known to even EU enthusiasts, but that has been central also in later EU processes. Finally, I found out that the most important group of people were the Troika mission officials that were sent to Greece to redesign their economic policy in less than two weeks. I call it the mission process.

My study on the power of experts and expertise turned out to be an analysis of the constitution of expertise, who was labelled as a reliable expert and how expertise was organised. An expert is seen to possess valid and valuable knowledge and solutions on problems at hand. I argue that the Troika emerged as a new knowledge regime in 2010. The decision-makers used mainly the expertise of the Troika for sense-making in the extreme ambiguity and uncertainty of a crisis. Firstly, I discovered the reasons for its formation: I disclose that the EU needed from the IMF practical expertise in loan negotiation, credibility, guarantee for austerity, and depoliticisation of the process. These needs were motivated by a lack of confidence towards the Commission among EU member states. Secondly, I revealed Troika’s internal relations: Interestingly, the IMF de facto led the Troika mission as a source of data, macroeconomics and negotiation model, but the Commission ruled on the content, especially on structural reforms. One story told by the interviewees described these relations aptly: due to the Icelandic ash cloud halting flights, the Commission mission members arrived later to Athens than the IMF who symbolically as negotiations professional and de facto leader welcomed the Commission—the de jure leader—whom they had to however officially wait to start the negotiations. In hurry—as they were afraid the IMF would start without them—the Commission members embarked in Brussels in a van, where the only woman member was left out, symbolising the male dominance. This van trip symbolises the ad hoc, class trip and closed circle nature of the process: a vanful of guys come to save a country! I could catch this feeling while sipping a cocktail in the Grande Bretagne hotel’s bar in Athens.

The Troika knowledge regime did not offer alternatives. Consensus meant no change in thinking. Contrary to many beliefs, my results showed that a) the IMF was also promoting austerity and did not push for debt restructuring in spring 2010, and b) the expansionary fiscal contraction theory did not influence as strongly as suggested. However, the negotiators believed in budget cuts. Major drivers were the fear of contagion and existing models and expertise, often not Greece-specific knowledge.

My lived experience of the power of individuals was visible in the 2010 data. Much was about who was in a suitable place and time. However, here it was possible to see the challenge of interviews as data, as regarding the EFSF stories conflicted on the original source of ideas.

Finally, it was a surprise to reveal that the experts became actual decision-makers. Even if the Eurogroup and IMF Managing Directors officially approved the Greek loan, the real decisions were done in the Troika. Also, the actual content of the EFSF was decided by Commission and member states officials. Thus, my research is ultimately a study of technocracy and ad hoc bricolage. It is a case of expertisation of politics, but not of democratisation of expertise. Uncertainty, hurry, pressure, novelty and exceptionality influenced this technocracy. It decreases EU’s legitimacy. This finding of technocracy also meant that I had to, as you can see in the back, update my causal mechanism: experts were even more important! However, they operated under member states’ and institutional constraints: the programme was forced to be drafted to attain a three percent deficit and a smaller debt in only three years with 110 billion euros and no debt restructuring. Many negotiators knew they had to build an over-optimistic programme that would convince the markets. It was felt there were no alternatives.

In conclusion, the stability of the paradigm resulted from the path dependency of the 2010 ad hoc decision-making in a closed circle that used in-house expertise which a) offered no alternatives, b) relied on ordoliberalism or a least existing institutional knowledge and c) became the de facto decision-makers who worked inside constraints. My theoretical contribution is to show how together the constraints (that also involved framing the crisis as fiscal that needed austerity and using the crisis to promote earlier policies), the institutional in-house knowledge and the technocratic policymaking regime, that used their existing institutional knowledge and beliefs in the EMU paradigm, led to a non-change of paradigm.

As mentioned, my research, situated in the ideational explanations of the crisis, is the first academic empirical process tracing of 2010 events and of the power of experts. My study shows that in the future there is a need for detailed process tracing, even if big narratives are compelling. I amplify existing research, for example, by highlighting more the role of institutions, especially the Commission, than many previous eurozone crisis and general EU research. As said, I also show that expansionary fiscal contraction theory had less impact and the IMF was more crucial for austerity than expected. My main contribution is in the power of ideas research in global political economy and international organisations by empirically studying and theorising the actual impact of agents as conveyors of ideas. My research confirms that experts who have access to decision-makers can exert important influence in a crisis in conveying new ideas that are needed in a situation where there is no ready modus operandi. I expand the concept of John Campbell and Ove Pedersen, knowledge regime, by analysing it on a transnational level and showing how it can turn into a de facto technocratic policymaking regime in crisis. Thus, constitution and organisation of expertise matters. I have shed light on internal experts that are often less a focus. Finally, I show how a paradigm change or the stability of a (EMU) paradigm is a combination of influence of ideas—the inhouse expertise—and institutional constraints, both leading to path dependency. Additionally, I indicate how fragmentation and gaps between departments and the autonomy of individual experts can hinder ideational change in international organisations.

My research points out the challenges of technocracy to democracy, openness and legitimacy. I started by a quote from the Commission, in the end we should hear the Greek perpective. Greek Finance Minister George Papaconstantinou depicted the technocracy to me: “So, there is a black box, and at the end of the day, you kind of have to take their [Troika experts’] analysis as given. You can produce alternative analysis, but it’s not really accepted.”

The findings of my dissertation will be of use to future crisis preparedeness. As experts have potential power in crises where there are ad hoc processes and a need for expert knowledge on new problems. Then it is crucial who is defined as an expert and whether they propose alternatives. In order to make effective and good quality decisions in which different perspectives have been genuinely taken into account and that allow the possibility of change, a ready structure of diverse expertise has to be in place before the need arises for crisis decision-making, when there is no time to acquire external expertise. Otherwise crisis decision-making can easily become technocratic.