Comparative European Politics

, Volume 14, Issue 5, pp 686–716 | Cite as

Capital markets and tax policy making: A comparative analysis of European tax reforms since the crisis

Original Article

Abstract

Since the creation of monetary union, European governments have received loans from the international financial markets at low interest rates. The recent sovereign debt crisis has, however, once more revealed the structural dependence of capitalist governments on the capital markets. Countries such as Spain and Greece are charged unsustainable interest rates and their policy decisions have come under scrutiny by international bond holders who fear losing their investments. Based on a unique dataset of European tax policy decisions from 2008 to 2010, we show that financial market pressure, in the form of rising bond yields, has forced European governments to raise their taxes, especially in the more regressive field of indirect taxes. The findings suggest that capitalist democracies have little political room to maneuver and to conduct redistributive politics at times of high fiscal stress.

Keywords

financial crisis tax policy European Union capital markets partisanship 

Notes

Acknowledgements

The authors claim equal authorship. We gratefully acknowledge funding from the German Science Foundation via the Collaborative Research Center 597.

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Copyright information

© Macmillan Publishers Ltd 2016

Authors and Affiliations

  1. 1.Jacobs University BremenBremenGermany
  2. 2.Jacobs University BremenBremenGermany

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