The political use of the term “moral hazard”: evidence from policymakers of the Eurozone. Bruges Political Research Papers 78/November/2019

Pierret, Laura (2019) The political use of the term “moral hazard”: evidence from policymakers of the Eurozone. Bruges Political Research Papers 78/November/2019. [Policy Paper]

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Abstract

Since the global financial crisis of 2007-8, the need for increased risk sharing between the members of the euro area has been acknowledged. However, the evolution towards an “insurance union” has been hampered by the political division between risk sharing and risk reduction. This paper intends to contribute to the explanation of this political deadlock by exploring the main explicit argument underpinning this division, that is to say moral hazard. Unlike most of the academic research on moral hazard, which takes the concept for granted, this paper explores moral hazard from an ideational point of view. The purpose of this research is to question the neutrality of the argument of moral hazard. Using discourse analysis techniques, the empirical study provides information on how and why policymakers of the Eurozone use the term “moral hazard”. This study argues that contrary to appearances, moral hazard is not a de-politicised concept. The author found evidence that the conception of moral hazard is shaped by strategic interests and/or prevailing set of ideas that explain divergent preferences towards risk sharing.

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