Altered Europeanization of pension reform during the Great Recession: Denmark and Italy compared

This article analyses the Europeanisation of national pension systems in Denmark and Italy. Through the analytical framework of a ‘two-level’ game, it analyses pension reforms in the two countries, which, in the wake of the crisis, breached EU budgetary requirements, and shortly after reformed their pension systems. The EU affects pension reform in both cases, but in distinct ways. When Denmark’s economy was financially vulnerable, the EU’s excessive deficit procedure affected the decision to reform pensions indirectly, by triggering a rapid political decision to speed up a pension reform. By contrast, the Italian economy’s critical vulnerability and the consequent risk for the whole Eurozone led to a situation whereby the European actors entered the domestic political scene and thereafter more forcefully induced reforms. The findings from the two cases show that the EU’s role in pension reform has been significant during crises, but through interaction with domestic actors. Furthermore, from a theoretical perspective, the intervening variables – domestic and EMU vulnerability as well as EU and domestic politics – are crucial to understanding the reform decisions through two-level games.

This article analyses the Europeanization of national pension systems in Denmark and Italy. Through the analytical framework of a ‘two-level’ game (TLG), we analyse pension reforms in the two countries, which, in the wake of the crisis, breached EU budgetary requirements, and shortly after reformed their pension systems. EU affects pension reform in both cases, but in distinct ways. When Denmark’s economy was financially vulnerable, the EU’s excessive deficit procedure (EDP) affected the decision to reform pensions indirectly, by triggering a rapid political decision to speed up a pension reform. By contrast, the Italian economy’s critical vulnerability and the consequent risk for the whole Eurozone, led to a situation whereby the European actors entered the domestic political scene and thereafter more forcefully induced reforms. The findings from our two cases show that the EU’s role in pension reform has been significant during crisis, but that it is through interaction with domestic actors. Furthermore, from a theoretical perspective, the intervening variables - domestic and EMU vulnerability as well as EU and domestic politics - are crucial to consider in assessing the reform decisions through the TLG.