Journal of European Public Policy

ISSN: 1350-1763 (Print) 1466-4429 (Online) Journal homepage: http://www.tandfonline.com/loi/rjpp20

The hard side of soft policy co-ordination in EMU:

the impact of peer pressure on publicized opinion
in the cases of Germany and Ireland

Christoph Meyer

To cite this article: Christoph Meyer (2004) The hard side of soft policy co-ordination in EMU:
the impact of peer pressure on publicized opinion in the cases of Germany and Ireland, Journal
of European Public Policy, 11:5, 814-831, DOI: 10.1080/1350176042000273559

To link to this article: http://dx.doi.org/10.1080/1350176042000273559

Published online: 04 Feb 2011.

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 Journal of European Public Policy 11:5 October 2004: 814831

The hard side of soft policy co-

ordination in EMU: the impact of
peer pressure on publicized opinion
in the cases of Germany and Ireland1
Christoph O. Meyer
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ABSTRACT The European Unions Stability and Growth Pact (SGP) and the
Broad Economic Policy Guidelines (BEPG) rely heavily on soft means of applying
pressure on member state governments both behind closed doors and also through
publicized recommendations and reprimands. But do these sanctions bite and if
so, how? Do they lead to learning, blame-shifting or technocratic public discourse?
These questions are not only relevant in the context of assessing the effectiveness
of economic policy co-ordination, but they also help us to better understand new
modes of governance. The article investigates how peer review impacts on publicized
domestic discourse by drawing on the results of a media content analysis in the
case of a critical recommendation addressed to Ireland in January 2001 (BEPG)
and an early warning (SGP) proposed in the case of Germany one year later. Both
case studies confirm that proposals for recommendations were given considerable
media attention and forced governments to justify themselves. However, while the
German government failed to deflect press criticism, the Irish administration could
increasingly rely on media support for its defence of budgetary sovereignty. The
article considers some explanations of why these debates developed differently. It
concludes by arguing that naming and shaming in its present form has not fully
realized its potential to induce learning and policy change.
KEY WORDS Broad Economic Policy Guidelines; economic co-ordination; fiscal
policy; Stability and Growth Pact.

1. INTRODUCTION
This paper seeks to advance our understanding of the functioning of economic
policy co-ordination under economic and monetary union (EMU) and new
modes of governance relying on peer pressure, persuasion and learning, rather
than legally enforceable regulation. Economic policy co-ordination has been
under intense review and subject to successive reforms, not least because
countries like France, Portugal and Germany have exceeded the public deficit
threshold specified by the Stability and Growth Pact (SGP). New modes of
governance are also discussed in the context of the implementation of the
Lisbon Strategy through the so-called open method of co-ordination (OMC)
Journal of European Public Policy
ISSN 1350-1763 print; 1466-4429 online 2004 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/1350176042000273559
 C.O. Meyer: Soft policy co-ordination in EMU 815
(Eberlein and Kerwer 2002; Heritier 2003; Hodson and Maher 2001). The
background to these debates is that the transition to EMU has led to a number
of policy co-ordination processes with varying characteristics, covering fiscal
and employment policies, and more recently also social inclusion, pensions
and equal opportunities through the OMC. The present study uses the term
of policy co-ordination in a broad sense to refer to the process through which
member states agree to meet common European concerns and objectives whilst
preserving their competences to legislate in the respective policy areas.
The spread of soft modes of governance has not only been publicly justified
as a means to overcome intra-European deadlocks, but also as an appropriate
reaction of decision-makers to the legitimacy deficit of top-down supranational
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policy-making. Policy co-ordination is seen by some scholars as a more flexible

alternative to and/or innovation of the Community method of integration
because of its potential to improve policy output and draw on the sound
legitimacy basis of the national political process (Girerd 2002; Scharpf 2001).
It is also seen as a system of governance with the potential to transform the
practices of member states, as Jacobsson (2002) puts it. On the other hand,
it has been pointed out that soft policy co-ordination is not as innovative and
deliberative as proclaimed (Linsenmann and Meyer 2002), while economists
have argued that peer review processes are in principle ill-suited to enhance
the problem-solving capacity of European governance.
The European Unions (EUs) SGP and the Broad Economic Policy Guide-
lines (BEPG) rely heavily on soft means of applying pressure on member
state governments both behind closed doors and through publicized recom-
mendations and reprimands. In contrast to the BEPG, the SGP also provides
for substantial fines against non-compliant member states, yet it is doubtful
whether these sanctions are politically credible and economically sensible. So
while the excessive deficit procedure comes with a stick, it has not been used
so far and it is doubtful that it ever will. At least for the time being, the most
powerful sanction of policy co-ordination is publicly naming and shaming
member states that do not comply with the rules or goals. But do soft
sanctions bite and if so, how? To what extent are reputational costs imposed
on member state governments and how does public discourse reflect on the
issues raised by supranational and foreign actors?2 These questions are not only
relevant in the context of assessing the effectiveness of economic policy co-
ordination, but they also allow us to better assess the utility of new modes of
governance. This article investigates how peer review impacts on publicized
discourse by drawing on the results of a media content analysis in Ireland and
Germany, following critical recommendations (BEPG) and an early warning
proposed by the Commission in January 2001 and 2002, respectively. While
further work is clearly needed, this study seeks to provide a first assessment of
whether peer review takes the EU down new roads of deliberative governance
or whether policy co-ordination walks the familiar path of technocratic
governance coupled with multi-level blame-shifting.
 816 Journal of European Public Policy
2. ECONOMIC POLICY CO-ORDINATION UNDER EMU: A
MODEL FOR EFFECTIVE AND DELIBERATIVE GOVERNANCE
WITHOUT BINDING LEGISLATIVE ACTS?
Before the early 1990s, policy co-ordination was used only sporadically in the
Community context and was limited in scope and weak in compliance (e.g.
the medium-term economic programmes). The Maastricht Treaty upgraded
and formalized a new generation of co-ordination mechanisms to meet the
convergence criteria for EMU. The two most important were the BEPG, an
annual procedure designed to co-ordinate national economic policies by setting
medium-term guidelines, monitoring progress and making recommendations
to individual member states. The SGP elaborates the excessive deficit procedure
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under Article 104 of the Maastricht Treaty, including the use of fines, in order
to ensure that member states do not threaten the stability of monetary union
through profligate fiscal policies.
Both governing modes provide for reputational sanctions in the form of non-
obligatory, ad-hoc recommendations proposed by the European Commission,
adopted by the Ecofin Council and can be made public. The wording of
annual recommendations under the BEPG is usually somewhere between
providing good advice and a slap-on-the-wrist. While the European Council
speaks of peer review and recommendations, the Commissioner for Economic
and Monetary Affairs, Pedro Solbes, calls recommendations a stimulus for
translating multilateral surveillance and peer pressure into national action
(European Commission 2002b). However, it was not until 2001 that non-
compliance led to the first-time application of individual recommendations
(read reprimands) vis-a`-vis a particular member state. The same is true for the
early warning procedure under the SGP. It was only when Europes economies
were entering troubled waters that peer pressure behind the closed doors of
the Economic and Finance Committee (EFC) and the Euro-Group spilled
over finally to the public domain; in January 2001 the Commission proposed
a critical recommendation to Ireland under the BEPG and an early warning
to Germany under the SGP one year later.
While there is mostly anecdotal evidence documenting how peer pressure
behind closed doors works, little is known about how public recommendations,
reprimands and outright naming and shaming affect domestic public discourse
and, ultimately, policy-making.3 This is why the present study looks at how
key instances in the EUs cycle of economic policy co-ordination impact on
national publicized discourse. The expectation that public discourse can
influence a governments policy response is in line with the literature on public
discourse as a mediating or intervening variable to explain domestic adaptation
of policies, institutions, procedures, ideas and identities to European integration
and governance (Risse et al. 2001; Schmidt 2001, 2002). It can also make an
impact on EU institutions (Meyer 2000). However, in modern democracies
the domestic public discourse is mostly transmitted through the news media.
They are not merely a mirror of the social and political world, but work as an
 C.O. Meyer: Soft policy co-ordination in EMU 817
interface, gatekeeper, agenda-setter and opinion-entrepreneur and advocate in
between the political system and the citizenry (Jarren et al. 1998; Bonfadelli
2001). By selecting, framing and commenting on an issue, an opinion, or a
process, they foster opinion formation, draw in and empower intermediary
groups and attribute reputational costs and gains.
Studies conducted at the national level indicate that naming and shaming
can be effective tools of public policy-making if a number of conditions are
fulfilled (Pawson 2002). For the measures to hurt, these conditions must
include the appropriate media publicity targeted at the right kind of audience,
a clear communication of the reason for the public naming and a recommenda-
tion for actions to correct the situation. The question is whether and to what
extent domestic publicized discourse is also responsive to reprimands coming
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from supranational institutions or other foreign ministers. If the national news

media and domestic political actors did not make the process visible, the
effective use of policy co-ordination as a new governing mode would remain
limited. Moreover, even if the media do give publicity to reprimands, they
could do so in different ways, each implying a different kind of discourse and
therefore, also, a different kind of impetus for governmental learning (see
Table 1).

Public review as learning discourse

The first vision conceives of public review as a means for political and non-
state actors to learn from each other, a stimulus of Europeanized and
transnationalized public discourse and a conduit for diffusion of knowledge,
ideas, values and meaning. Accordingly, we would expect media discourse to
react with substantial and largely accurate coverage to public recommendations
from the Commission or the Council of Ministers. The supranational institu-
tions and foreign ministers, who issue or underwrite such proposals, would be
portrayed as legitimate in their public role, even if national actors disagreed
with their positions. We would expect a vigorous debate among government
representatives, opposition leaders, interest groups and other civil society actors
over whether the governments policies deserve a reprimand and whether a
change of policy to increase compliance was needed. The government would
either justify its position and argue that it was still committed to the common
rules, or it would indicate a shift in policy in order to learn from the
recommendations.

Public review as blame-shifting discourse

According to the second vision, we expect public review to induce a nationally
isolated blame-shifting and credit-taking discourse. This would run counter to
the professed purpose of soft modes of governance to preserve the national
autonomy and accountability for conducting economic and fiscal policies. In
such a setting, media coverage may be high, but focuses only on sovereignty
 818 Journal of European Public Policy
Table 1 Three visions of public review and public discourse

Blame-shifting
Learning discourse discourse Technocratic discourse
Description Public arguing as Two-level games of Mostly administrative
governments justify credit claiming and learning behind the
and adapt their blame shifting as scenes as public
policies in order to governments seek to discourses are limited
improve them avoid negative publicity to small expert publics
Public High frequency, Low frequency, high Intermediate
visibility intermediate salience salience frequency, low salience
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Portrayal of Taken into account as Contested legitimacy Accepted as legitimate

EU/foreign legitimate speakers on of their commenting speakers because of
actors agreed EU objectives on domestic policy their technocratic
issues expertise
Reputational Moderate High/Moderate Low
cost to
government
Expected High Doubtful, depends on Intermediate, only
impact on government spin gradual changes
policies
Expected Economic learning, Them against us, Economic learning
discourse Credibility of Hard sanctions, (both pro and contra
frames government, National sovereignty government),
Credibility of EMU Hard sanctions

infringing aspects of the review procedure. The main reference point remains
national political institutions and actors, whereas European actors are hardly
cited and if so, as marginal, intrusive or overbearing actors imposing rules.
The government will either blame other governments or central institutions
for the malperformance and attempt to be seen as the defender of the national
interest. It may, however, also welcome the reprimand from Brussels for the
effect it has in strengthening its hand vis-a`-vis domestic opposition. Thus,
public review offers political actors a stage for symbolic politics either to style
themselves as defenders of national sovereignty in sensitive policy areas or,
alternatively, to push through unpopular reforms with reference to Brussels
issuing inescapable recommendations as a kind of supranational law.

Public review as technocratic discourse

The third vision, finally, emphasizes the role of peer review as a largely
technocratic process of learning among administrative elites and so-called
 C.O. Meyer: Soft policy co-ordination in EMU 819
epistemic communities, largely leaving out or reframing politically charged
issues for the benefit of scientific reasoning and bounded rationality. Public
recommendations are in this respect little more than a mobilizing factor for
small segments of elite opinion, which may not have been aware of a particular
issue. We can expect media coverage to be limited and focused more on the
economic than the political dimension of the recommendations in contrast to
the learning discourse. We expect relatively little visibility for concerns over
national sovereignty, distributive justice or political values, since the relevant
elites have been involved in the process of policy co-ordination anyway. The
public discourse will concentrate mainly on policy substance and co-ordination
procedure. Policy adaptations as a response to these recommendations are only
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likely if there has been disagreement between technocratic and political elites.

3. STUDYING THE IMPACT ON QUALITY PRESS DISCOURSE

If publicized discourses do matter, the empirical question for the study of peer
review is, of course, how critical recommendations are being decoded at the
national level. The first challenge in studying mediatized discourse is to ensure
a high degree of validity and reliability. National public discourse is not
identical with statements of political leaders quoted in the press and on
television, or the comments of media personalities. Presenting public discourse
in the form of a seemingly random selection of statements from political actors
or editorials, as some authors of discourse analysis do, is vulnerable to the
charge of subjectivism (e.g. Schmidt 2001). The present content analysis
focuses on the leading representatives of the quality press with nationwide
appeal. In the case of Germany, the centre-left Suddeutsche Zeitung (circulation
426,000/day) and the conservative Frankfurter Allgemeine Zeitung (circulation
393,000) were selected. The counterparts in Ireland were the centrist (with a
social-democratic slant) Irish Times, and the centre-right (pro-business) Irish
Independent with a circulation of 117,000 and 162,000 copies/day respectively.
The readership is usually between two and three times the figure of the
circulation.
While this selection cannot claim to fully represent publicized opinion in
both countries (owing to the absence of TV news and tabloids from the sample),
the choice of leading newspapers can be considered a good approximation of
quality press opinion and elite public discourse on this topic. One needs to
keep in mind that these media outlets are often more receptive to EU affairs,
which implies a higher relative probability of finding more favourable coverage
of EU recommendations. The observation time spans three weeks in each case,
from the Commission issuing its proposal for a recommendation up to the
decision in the Ecofin Council and the immediate aftermath. A total of 132
articles and editorials were selected dealing with the topic by key-word scanning
and subsequent elimination of irrelevant news articles and editorials from the
 820 Journal of European Public Policy
online database Lexis-Nexis (for the German broadsheets and the Irish Times)
and the newspapers own archives (for the Irish Independent).
To obtain a better understanding of the reputational costs imposed by media
coverage, the content analysis focuses on three aspects: (i) the quantity and
profile of the issue coverage as an indicator of media attention on the issue;
(ii) evaluation by media commentators, experts and interest groups of the
governments policy stance and political reaction to the recommendation as an
indicator of publicized opinion; and (iii) the portrayal of supranational and
foreign actors in the public discourse as an indicator of the degree of
Europeanization of discourse. Moreover, in order to gauge the presence of the
three visions of peer review and discourse, the content analysis draws on six
different news frames, which serve as interpretative schemata to reduce and
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capture the complexities of the political processes as they are being translated
into news content and format (see Annex). A negative recommendation
proposed by the Commission could be framed in various ways and lead to
different types of discussions, such as a discourse on sovereignty (How dare
the Commission meddle in our affairs?), in an economic discourse (Does the
Commission present better economic arguments?), or in a political discourse
about the credibility of the Stability Pact (What should the government do
to safeguard EMU?).
While the results gleaned from cases studies are inevitably limited, they are
less so because they constitute crucial cases of first-time application of
the legal provisions in real-life politics (Olsen 2000). Following historical
institutionalism, it is also expected that the new legal provisions prove their
utility either early or not at all. In other words, it is the first period between
the adoption of legal and/or political bases for procedures and instruments
and a rather short period afterwards where actors set precedents, which shape
the path (Pierson 1998) or at least corridors of possible behaviour for
implementing the provisions.

4. THE IRISH CASE: THE RECOMMENDATION UNDER THE

BROAD ECONOMIC POLICY GUIDELINES4
On 24 January 2001, the Commission decided to ask the Ecofin Council to
address a critical recommendation to Ireland under Article 99 (4) Treaty
Establishing the European Community (TEC). Such a recommendation is not
legally binding on member states but should be taken into account, even
though no sanctions are envisaged in case of non-compliance. The Commission
deemed the step necessary, because the tax reductions in the proposed Irish
budget for 2001 were seen as a breach of the BEPG agreed in June 2000 by
all member states, including Ireland. They stated that the Irish authorities
should be ready, already in 2000, to use budgetary policy to ensure economic
stability given the extent of overheating in the economy; gear the budget for
2001 to this objective. The Commissions official argument was that Ireland
 C.O. Meyer: Soft policy co-ordination in EMU 821
had failed to live up to these guidelines and had proposed a pro-cyclical and
expansionary budget likely to overheat the economy. On 12 February, the
Ecofin Council adopted a revised version of the recommendation against
Ireland, restating its criticism of the proposed budget as expansionary and pro-
cyclical and demanding corrections to remove the inconsistency. Not the
recommendation itself, but the preamble contains the figure of 0.5 per cent of
gross domestic product (GDP) for the required reduction in fiscal expansion
(Council of the European Union 2001).

Intensity of coverage
The Commission proposal followed by the Ecofin Council was met with
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considerable media attention in most EU member states, most notably of

course in Ireland.5 During the observation period of three weeks from
25 January to 14 February 2001, seventy-four articles were published dealing
with the topic: forty-one articles in the Irish Times (IT) and thirty-three in the
Irish Independent (IND), including a substantial number of headlines, editorials
and opinion pieces. This amounts to an average of two articles per publication
day. Despite peaks surrounding certain events, coverage was quite continuous
with multiple submissions by economists and politicians of opinion pieces on
the issue and regular reporting by Brussels correspondents. The IND was
publishing more editorials and analysis from its own staff. The articles were
altogether shorter than those published in the IT. On balance, media awareness
of peer pressure procedures has been quite high, even though most of the
attention was spurred by the original Commission proposal and not the actual
Council decision.

Publicized opinion
The domestic public discourse in Ireland was heavily influenced by the
governments defence of its budget. Both broadsheet papers recorded mainly
the robust public statements of Finance Minister Charlie McCreevy, while
other government figures, including the Prime Minister (Taoiseach) Bertie
Ahern, and the Minister for Foreign Affairs, Brian Cowen, were hardly quoted.
McCreevy consistently rejected the calls for amendments to the budget and
argued that the Commissions economic analysis was wrong (IND, 26.1.01).
At times, he also suggested that EU criticism was attributable to the jealousy
of some partners over Irelands economic performance and vengefulness for its
refusal to agree to some form of tax harmonization: We have no friends in
Brussels regarding our corporate tax regime or in any EU capital and this is
creating the background music for what we are hearing now (IT, 26.1.01, p.
50; also IND, 25.1.01). Deputy Prime Minister Mary Harney expressed hope
that everybody would put on the green jersey on this occasion and not play
politics with the issue (IT, 3.2.01). Hence, the governments communication
strategy was to win the economic argument and frame the issue as a matter of
Irish national interest and sovereignty.
 822 Journal of European Public Policy
The government largely succeeded in bringing interest groups and the
community of economists on their side, partly through considerable off-the-
record spin, but mostly because it was pushing an open door. The Financial
Service Industry Association supported the Finance Ministers stance and the
Irish Business and Employers Confederation described the Commissions
criticism as excessive and alarmist (IT, 26.1.01, 10.2.01). Virtually all opinion
pieces from leading economists such as Robert Mundell as well as the analytical
articles from business section editors of both newspapers argued that there was
little rationale for such a step, given the size of the Irish economy, the impact
of external rather than internal factors on economic growth and inflation in
Ireland, as well as the figures pointing to the fall in inflation figures (IT,
3.2.01; IND, 2.2.01, 10.1.01). Some conceded that the real problem lay with
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fiscal policies of larger member states, most notably Italy, but that this was a
political issue and Ireland was unfairly singled out.
Not surprisingly, opposition parties found it difficult to argue in favour of
taking back tax reduction worth 508 million (0.5 per cent GDP) under
conditions of a substantial budgetary surplus. While the initial reaction from
Labour and Fine Gael was quite critical, accusing McCreevy of causing an
international embarrassment, putting economic prosperity at risk and incur-
ring the wrath of the Commission (IT, 25.1.01), these voices soon abated
when publicized opinion as well as public opinion polls turned against them.
Opposition leaders concentrated their critique on the tone and style of
McCreevys diplomacy in Brussels, not on the legitimacy of the rules themselves.
Only John Bruton, leader of the Fine Gael party, pointed out that [i]t is a
recommendation arising from the broad economic policy guidelines for EU
member states, set down by the Ministers of Finance, including Charlie
McCreevy . . . The Commission expressed similar adverse opinion about the
sustainability of the Governments economic policies in 1999 and 2000. The
only difference now is that they have said the same things with greater
formality (IND, 2.2.01).
The opinions expressed by the two Irish broadsheets differ between the
papers as well as over time. The ITs Brussels correspondent highlighted
that the Government had ignored repeated warnings that its policies were
inconsistent with the EUs broad economic policy guidelines, which were
agreed by EU finance ministers including Mr McCreevy (IT, 25.1.01, p.
20). The editorial on the same day, however, considered the formal reprimand
a remarkably severe response and a bit heavy-handed (IT, p. 19). Throughout
its coverage, the IT questioned the economic wisdom of the recommendations,
but emphasized the benefits that European integration has had for Ireland. It
also warned against ideologically assertive interventions and increasingly
defiant justifications, and that [p]olitical capital within the EU is all too easily
squandered by such thoughtless tactics (IT, 13.2.01, p. 15). The IND in
contrast was initially rather critical of the government: From the European
viewpoint, Irish fiscal policy is dangerously out of line . . . We run a serious
risk of losing our name as good Europeans. The Government had better
 C.O. Meyer: Soft policy co-ordination in EMU 823
hurry to mend fences (IND, 25.1.01). Increasingly, however, the sovereignty
issue came to the fore. The papers Brussels correspondent began to question
the political clout of the Brussels mandarins and their fit of pique (27.1.01)
and an editorial complained that Brussels was picking on the minnows
(1.2.01). In a remarkable editorial turnaround, the INDs commentaries called
the Commission proposals for tighter rules Federalism by stealth (8.2.01) and
the Councils recommendation An unjust punishment (13.2.01).

European voices
The only foreign sources consistently mentioned in Irish news reports and
commentary on the crisis was the Commission, and in particular the Ecofin
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Commissioner, Pedro Solbes. President Romano Prodi was described as a

pained schoolteacher (IT, 25.1.01) and somewhat patronizing at a chaotic
press conference. After Prodis less than impressive performance, the Commis-
sion apparently left it to Solbes and his spokesperson to state the Commissions
case. Even the Irish Food and Safety Commissioner, David Byrne, refrained
from public comments, although reports noted his efforts to water down the
text of the recommendation. Solbes was quoted as a legitimate and mild-
mannered voice in both papers and usually without the undertones associated
with British eurosceptic papers. However, relatively little space was given to
the Commissions case and domestic voices far outnumbered those of other
EU institutions. The only significant support came for the European Central
Banks (ECBs) President Wim Duisenberg who warned against the risk of
destabilizing monetary union (both papers on 2.2.01).
Apart from the Commission statements, there were virtually no statements
from the Swedish presidency and few from other finance ministers. The only
exception was the German Finance Minister, Hans Eichel, who was quoted in
support of the reprimand: There are common responsibilities and Ireland
must face up to that. All of us have a responsibility to follow the rules and
that is as true for Ireland as any other country (IT, 29.1.01, 1.2.01, 6.2.02).
Indeed, a considerable degree of GermanIrish antagonism developed in the
Irish discourse as most of the publicly cited critics were German, such as the
chief economist of the ECB, Otmar Issing, and the President of the Bundes-
bank, Ernst Welteke. The Vice-President of the Bundesbank, Ju rgen Stark,
and the Christian Democrat Member of the European Parliament, Werner
Langen, were also quoted with suggestions that EU subsidies could be lowered
if Ireland was not prepared to take measures to curb inflation (IT, 10.2.01;
IND 11.1.01). According to interviews with German officials, the conflict
escalated to the highest level as Taoiseach Mr Ahern urged Chancellor Schro der
to tell Mr Eichel to exercise more public restraint.
 824 Journal of European Public Policy
5. THE GERMAN CASE: THE EARLY WARNING LETTER UNDER
THE STABILITY PACT
On 30 January 2002, the Commission issued a recommendation for an early
warning to be adopted by the next Ecofin Council on the basis of Regulation
1466/97 of the SGP. The Commission argued that Germanys budget deficit in
2001 was substantially higher (by 1.1 per cent) than the governments own
forecast in the Stability Programme and was expected to rise to at least 2.7 per
cent in the year 2002, coming close to the 3 per cent of GDP threshold. The
Commissions proposal foresaw that Germany should adopt additional saving
measures above those outlined in the Stability Programme once economic recov-
ery is firmly established with a view to achieving a balanced budget in 2004
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(European Commission 2002a). The German government rejected the need for
an early warning, since it regarded its fiscal policies to be already in line with
European demands. In the early morning hours of Tuesday 12th, the Ecofin
Council presented an informal statement on the budgetary situation of Ger-
many, in which it welcomes a number of commitments of the German govern-
ment to the effect that it would use any budgetary room for manoeuvre to reduce
the deficit to reach a close to balance position by 2004. [T]he Council considers
that it [Germany] has effectively responded to the concerns expressed in the
Commission recommendation, and therefore the recommendation is not put to
vote and the procedure is closed (Council of the European Union 2002: 1).

Intensity of publicized discourse

The Commissions decision to propose for the first time in the history of the
SGP an early warning letter to a country in danger of violating its provisions
(and the one that had championed establishment of the Pact in the first place)
received intensive coverage in both newspapers between 30 January and
14 February 2002. During the observation time period the centre-left Su d-
deutsche Zeitung (SZ) published twenty-one articles on the subject, whereas
the Frankfurter Allgemeine Zeitung (FAZ) covered the issue with twenty-seven
articles. Most of the latter were analytical or reportorial pieces and on average
longer than those of the SZ, which relied partly on news agency material. The
issue received headline treatment on seven days in the FAZ, and on five days
in the SZ. Coverage peaked around the Commissions and the Councils
decisions. It also intensified significantly following the Commission proposal
when it became apparent that the German government, contrary to its initial
announcement, was trying hard to convince other countries to drop the early
warning. In contrast to the Irish case, there were hardly any opinion pieces by
economists or other experts.

Publicized opinion
The initial response of the German government came from Finance Minister
Hans Eichel, who interpreted the potential early warning as a confirmation of
 C.O. Meyer: Soft policy co-ordination in EMU 825
his tight budgetary policies. He argued that the state of the public finances
was to a considerable extent due to irresponsible policies on the part of the
previous government as well as those of the regional governments (La nder),
and that the Commission recommendation was evidence that the oppositions
demands for further tax cuts were reckless (SZ, 31.1.01, p. 4; FAZ, p. 1). The
governments public communication changed dramatically after Chancellor
Schro der reversed the course of his Finance Minister and instructed German
diplomats to oppose the early warning letter. Publicly, Schro der suggested that
there must have been other than economic reasons for the Commission to
propose the measure, a statement hinting at a conspiracy against the country
(SZ, 11.2.02). The Chancellery let it be known that the Commission proposal
was just the latest among many hostile decisions against the government,
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especially in the area of competition policy and state aids. A government

source is quoted as saying: one has got to understand that the Chancellor says
at some point enough is enough (SZ, 2.1.02). At the same time, Schro ders
spokesperson was quoted as saying that the government firmly stood by the
Stability Pact and intended no watering down.
The oppositions public stance was straightforward: the newly elected joint
Chancellor candidate of the Christian-Social Union (CSU) and the Christian
Democratic Union, Edmund Stoiber, called the Commission proposal the
final verdict of failure on the governments economic policies (SZ, 31.1.01).
When it became apparent that the government was attempting to avoid the
early warning letter, the leader of the Christian Democratic Union (CDU),
Angela Merkel, called this strategy a scandal and an embarrassment, given
that the SGP and its 3 per cent threshold were considered as an achievement
of the previous government (SZ, 8.2.02). The Liberal Party (FPP) warned that
the governments actions were undermining the credibility and trustworthiness
of Germany among its European partners as well as the Stability Pact itself
(SZ, 11.2.01). However, opposition leaders did not publicly set out an
alternative economic scenario for meeting the budgetary commitments of the
SGP. The party leader, Merkel, was critical that Germany applied considerable
political pressure to reach its goal, thus harming Germanys relationship with
its partners (SZ, 13.2.01).
The only comment from social partners and business associations came
from the deputy chairwoman of the German Trade Union Association (DGB),
Ursula Engelen-Kefer, who was quoted as saying that the federal republic is
in a rather special situation. It has got to manage the German unification.
She also said that the criteria of the Stability Pact were maybe a bit too strict
(FAZ, 11.2.01, p. 1). At that time, this was the only domestic voice in any of
the articles to suggest that the rules of the SGP needed to be relaxed or
watered down. The Tax Payers Association used the opportunity to urge
Eichel to apply pressure on the German regional government to finally agree
on a workable national stability pact (SZ, 11.2.01, p. 21).
There was hardly any reaction from the banking sector and the German
Bundesbank. Only the deputy head of the Bundesbank and former negotiator
 826 Journal of European Public Policy
of the Stability Pact, Ju rgen Stark, made a couple of critical remarks about the
government flouting the rules, and his superior, Ernst Welteke, voiced his
support for an early warning to Germany at the ECBs Governing Council,
but not on the record (SZ, 9.2.02).
The harshest criticism of the government came from media commentators.
In comparison to the Irish broadsheets, both German papers had several
correspondents in Brussels (the SZ three, the FAZ five). They elaborated in
several pieces on the embarrassment caused by the former best pupil and
indeed strict teacher being the first to come in for a reprimand under the
terms of the treaty. Both papers were openly scornful of the Finance Ministers
attempt to reinterpret the warning as a confirmation of his policies: The
Finance Minister reminds one of a pupil, who comes home with very bad
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grades but beaming with joy. He explains to his puzzled parents that even his
teachers agreed with him and that everything was in order and according to
plan (SZ, 31.1.01, p. 4; similarly FAZ, 31.1.01). Indeed, it may be the case
that the early derisory reports played a role in prompting the Chancellors
intervention and the shift in strategy away from accepting and towards fighting
the early warning. However, both papers were very critical of the governments
attempt to have the early warning rejected in the Ecofin Council by intense
lobbying of other potential sinners, such as France, Italy and Spain (FAZ,
8.2.02; SZ, 7.2.02). Whereas the FAZ expressed considerable concern over
both the economic and the political consequences of the governments actions
(12.2.02, p. 11), the centre-left SZ focused more on the political repercussions
of what was portrayed as bullying of smaller member states.

European voices
The Commissions view represented by Pedro Solbes was given considerable
space not only because he could present his views in an opinion piece for the
SZ (7.2.02). Romano Prodi appeared only briefly in the headlines when
reprimanding his German colleague, Gu nther Verheugen, for violating the
collegiality principle by publicly distancing himself from the Commissions
proposal (FAZ, 6.2.02, p. 1). In contrast to the Irish case, Pedro Solbes
received substantial support from media commentators. They rejected the
Chancellors accusations that the Commissions actions were politically moti-
vated and suggested that Schro der was suffering under Brussels paranoia
(FAZ, 10.2.02, p. 1). The President of the ECB, Wim Duisenberg, was quoted
in German with a single critical comment, as well as that of his chief economist,
the German Otmar Issing, only very late in the process (SZ, 9.2.02, p. 25).
Just as in the Irish case, the low visibility of other member state politicians is
noteworthy, with the only exception being the Prime Minister of Luxembourg,
Jean Claude Juncker, who came out in favour of the German government.
Austria, Belgium, Finland and the Netherlands were described as being in
favour of the early warning, but did not say so publicly until after the Ecofin
meeting (SZ, 13.2.02, p. 21).
 C.O. Meyer: Soft policy co-ordination in EMU 827
6. CONCLUSION
This study cannot prove the impact of publicized discourse on policy-makers,
but it does show that negative recommendations under policy co-ordination
have had a significant impact on national news media discourse. The broad-
sheets in both countries devoted considerable attention to the critical recom-
mendations, producing a number of headline stories, opinion pieces and
editorials. The political conflict assumed quite a high public profile, even
though debate in Germany was more homogenous and less opinionated than
in the Irish case. At least in these instances of first-time application, peer
review procedures, which involve the singling out of member states, have proved
capable of generating considerable public attention, forcing governments to
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justify themselves and contributing to a rapid politicization of decision-making.

The key European protagonist in both debates was the Commission, not the
Council and its members as the notion of peer review would have suggested.
The findings on whether peer review imposes reputational costs on govern-
ments are ambivalent. Clearly, both governments tried to change or dismiss
the recommendations, criticized the Commission for a lack of political
sensitivity and clout, and even suggested that its proposals were politically not
economically motivated. While both governments initially faced quite critical
media coverage, the Irish administration largely succeeded in convincing
journalists and other opinion leaders to frame the issue in terms of Eurozone
economics, national interest and the defence of fiscal sovereignty. In Germany,
the press focused considerably less on economics than on the need to uphold
agreed rules and principles, while the argument about sticking to previous
commitments and jointly agreed rules was largely lost. Even though this
study cannot prove causality, German officials interviewed stressed that the
controversy surrounding the early warning played a facilitating role in coming
to an agreement in March 2002 on an albeit soft, national stability pact between
the German federal government and the La nder authorities (Linsenmann 2003;
Thiel 2002). As for the Irish case, the change in economic circumstances
prevented a serious test of whether the government was prepared to fully carry
through its agenda of pro-cyclical tax cuts. The perception of being bullied by
Europe clearly did not help the yes campaign during the run-up to the first
referendum on the Nice Treaty on 7 June 2001.
When we confront the competing visions of peer review (Table 1) with the
evidence from the case studies, the emerging picture is not clear. In the case
of Germany, we find some evidence for an emergent learning discourse reflected
in the news frames on the credibility of the SGP and the government. In the
Irish case, however, we see the dominance of news frames relating to the
economic justification of the recommendations (technocratic discourse)
coupled with a debate about undue foreign interference as the Irish government
succeeded in avoiding a discussion about its responsibility under the BEPG
(blame-shifting discourse). The puzzle is how these differences in the adapta-
tion of national discourse can be explained. A reliable answer to this question
 828 Journal of European Public Policy
cannot be advanced on the basis of our empirical evidence. More cases for
comparison would be needed, such as Portugal or France. However, one can
advance hypotheses to be tested further.
It seems that most of the variation is either due to variations in key actors
public communication, for instance the Commission and the Council treating
Germany more cautiously than Ireland, or attributable to national differences
in the salience of sovereignty issues, elite attitudes to EMU, the credibility of
the incumbent government and the capacity to digest complex economic
issues. If domestic variables are of overwhelming importance, public peer
review may work better in some countries, but not in others. Our preliminary
research suggests that while domestic variables are clearly very important, they
do not fully determine the course of domestic debates. Some attention should
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also be paid to the type of policy conflict at stake, given that it is considerably
more difficult to criticize an administration for distributing surpluses than to
ask for budget cuts in times of recession. Moreover, EU institutions and actors
can improve their public communication to avoid an instinctive backlash
against Brussels meddling (Meyer 1999). More and earlier efforts should go
into carefully preparing national governments, expert communities and publics
for the possibility of a reprimand. The Council and its Presidency should also
assume a more high-profile role to avoid the typical pattern of scapegoating
the Commission. However, even if such steps were taken, serious doubts
remain about whether policy co-ordination can develop into an innovative
governing mode, which promotes policy learning and cross-national dialogue.

Address for correspondence: Christoph O. Meyer, Birkbeck College, 26 Russell

Sq., London WC1B 5DQ, UK. email: christophomeyer@aol.com

ANNEX

Overview of news frames for coding of articles and results

No. Frame Description of frame (coding) Ireland Germany
1 Credibility of the Credibility of the Stability Pact and the 17.6% 41.6%
Stability Pact/ stability of monetary union depend on 13/74 20/48
EMU following the agreed rules. The first-time
application of reprimand or early warning
sets a precedent for how future cases will be
dealt with.
2 Credibility of the The implications for the credibility and 12.1% 35.4%
government political capital of the government in Europe, 9/74 17/48
if the government did not follow the rules.
3 Them against us Discussions about whether the country is 18.9% 4.2%
discriminated against for other than 14/74 2/48
economic reasons, such as jealousy or
vengeance.
 C.O. Meyer: Soft policy co-ordination in EMU 829
4 Economic Focus on whether the recommendation is 36.5% 16.4%
reasoning justified on economic grounds. 27/74 8/48
a) Criticizing the
The governments inadequate economic 10.8% 8.3%
government policy has led to the present violation of the 8/74 4/48
Stability Pact. Economic learning is (or is
not) induced.
b) Supporting the Articles arguing in favour of the governments 25.7% 8.3%
government economic policies and against EU 19/74 4/48
recommendations on economic grounds.
5 Hard sanctions Focus on the threat of sanctions in case the 7.0% 2.1%
government continued its non-compliance 5/74 1/48
with EU rules.
6 National Focus on the whether the government is 8.1% 0%
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sovereignty obliged to follow early warning/reprimand or 6/74 0/48

whether this is a violation of national
sovereignty.
Number of articles per case N74 N48

NOTES
1 Research for this paper was supported by the European Community under
the 5th Framework Programme (Contract No. HPSE-CT-2001-00045; see also
www.govecor.org). The author would like to express his gratitude for able research
assistance by Tobias Kunstein and for excellent editing support by Anne Harring-
ton. He would also like to thank three anonymous referees for their perceptive
comments on this paper. Finally, the author has benefited from opinions on earlier
versions of the paper from Wolfgang Wessels, Ingo Linsenmann, Daniel Gros,
Amy Verdun, Beate Kohler-Koch and participants at the ECPR conference in
Bordeaux and the Stability Pact conference in London. The usual disclaimer
applies.
2 There may also be economic disadvantages to the national economy of a country
that is being publicly criticized by its EU peers. However, this article cannot
investigate whether and to what extent financial markets and investors are reacting
to this publication. Yet, we can assume that even their reaction will to some extent
depend on the salience and continuity of media coverage on this issue.
3 The questions of why and when ministers bow or adapt to the pressure of their
peers are not yet conclusively answered either. Among the factors commonly cited
are the loss of political capital, trust and credibility that is associated with outright
recalcitrance, which may lead to bargaining disadvantages in the same or other
policy areas. Hardly explored, at least in the mainstream political science literature,
are the psychological factors relating to socialization and exclusion processes in
different group settings. What made the French Finance Minister Francis Mer
adapt to the common vision of the Euro Group and what made the former
German High Official of the Finance Ministry, Ju rgen Flabeck, an outsider in
the Economic and Finance Committee (EFC)?
4 I would like to acknowledge the very helpful comments and information from
Brendan Lynch, who works as an associate of the Institute of European Affairs,
Dublin, and has also written the national report for the Govecor research project
(Lynch 2002). The usual disclaimer applies as to my responsibility for the text.
5 It is interesting to note that the Commission proposal and subsequent drafts had
apparently been leaked to (or acquired by) the press, even though according to the
 830 Journal of European Public Policy
Treaty a Recommendation was to be published only after having been adopted by
the Council. Indeed, the Irish Finance Minister, Charlie McCreevy, accused the
Commission of deliberately leaking the text, while the latter argued that there
were just too many people, including member state officials, involved in the
process to put the blame on the Commission.

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