During the Eurozone crisis, governments with financial difficulties had to implement structural reforms in exchange for European financial help, what is known as conditionality. The literature shows that social concertation between governments and trade unions is likely to emerge under external constraints (Natali and Pochet, 2009; Avdagic et al, 2011). However, government choice whether to include or not trade unions in policymaking processes during the Eurozone crisis is not clear. Some authors explain that social dialogue was a key component of adjustment processes (Ghellab and Papadakis, 2011), and that there was an increase of social pacts (Campos Lima and Martin Artiles, 2011). To the contrary, other scholars argue that there was an erosion of corporatism that increased with the pace and intensity of the crisis. The sensation of urgency to carry out reforms to decrease public deficits and debts turned social pacts into a “luxury” (Papadakis and Guellab, 2014:2).
Under what conditions did governments resort to concertation or unilateralism during the Eurozone crisis? Why did some governments include trade unions in negotiations and others did not? This article argues that previous explanations fail to address variation of government choice because they focus only on external variables. To the contrary, this article combines “theories of domestic politics and two-level games” (Moravcsik, 1993: 518) to explain different government’s strategies under EU conditionality. It argues that governments in financial difficulties had to comply with European external demands to receive financial help but their responses to those demands also depended on their ideological preferences and domestic consensus building dynamics. The article illustrates these arguments by analysing the impact of EU conditionality on policymaking processes of pension and labour market reforms in Portugal and Spain from 2010 to 2013. The article uses process tracing methods to explain political actor’s behaviour and decision-making processes (Levy, 2008:11). It triangulates different sources such as the in-depth analysis of European and national documents (National Reform and Stability Programmes, Country Specific Recommendations, Memorandum of Understanding, etc.), media news and journalistic accounts, and face-to-face interviews to politicians and trade unionists realised by the author between 2015 and 2017.