Finance and the macroeconomy: the politics of regulatory reform in Europe

This article analyses major changes in the regulation of the financial sector across Europe over the last three decades. The authors explain the timing of major regulatory variation in regulatory outcomes across five countries (Britain, France, Germany, Italy and Spain) in terms of political calculations on the part of elected eacutelites that involve the relationship of financial regulation to other policy areas (including monetary policy and pension reform). The first countries to initiate major regulatory overhauls in Europe were those in which postwar regulatory institutions raised the costs to elected governments of imposing monetary austerity in the 1970s. On the other hand, the move to create single, politically accountable financial regulators in Britain and Germany over the following decades is related by the authors to the more radical effort to promote private savings at the expense of mandatory pensions in these two countries.