Levels of Analysis and the Euro Crisis

The decisions of German Chancellor Angela Merkel have emerged as a key individual-level driver of outcomes in the eurozone financial crisis.

The financial crisis unfolding in Europe provides a stark illustration of the complex interactions between system-level, state-level, and individual-level variables in contemporary world politics. Political scientists employ these three (and sometimes more) levels of analysis as an analytical device to categorize the causal “drivers” that produce outcomes in international relations.  This framework might shed light on the current Eurozone crisis as follows:

(1) The system level of analysis includes attributes of the international system and supranational actors.  The power imbalance between the wealthier and more financially secure European states, such as Germany, and those needing bailouts, such as Portugal and Greece, can be viewed as a system-level factor placing pressure on weaker states to abide by the stronger countries’ demands.  The same could be said of the “top-down” pressure from International Governmental Organizations (IGOs) such as the European Union and the International Monetary Fund on countries such as Greece and Ireland to enact austerity measures in exchange for bailouts.

(2) The state or domestic level of analysis includes factors such as political institutions, interest groups, public opinion, and political parties.  The ease with which governments can fall in parliamentary systems (as opposed to presidential systems) helps to explain the events of the past week in Greece and Italy.  The anti-austerity attitudes of public opinion and labor unions have led to political instability and a reluctance by some policymakers to agree to the harsh terms imposed by external actors.

(3) The individual level of analysis focuses on the choices, perceptions, and personalities of individuals (normally political leaders and other influential individuals).  The critical decisions by former Greek Prime Minister George Papandreou to (a)  call for a referendum on the bailout plan, and then (b) to withdraw this request and hand over power to an interim government are causal drivers located at the individual level of analysis.  The perceptions and choices by other key players such as German Chancellor Angela Merkel and European Central Bank Chairman Mario Draghi are also important individual-level factors that have shaped, and will continue to shape, the course of this crisis.

What do you think?  Do causal drivers at one level of analysis seem to be particularly influential in the current European financial crisis?  How are variables from different levels interacting to shape outcomes?  Is it possible to model these interactions and predict how all of this will end, or is such a feat beyond the skills of even our best political scientists?

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