Varieties of Capitalism, Quality of Government and Trust in Portugal and Greece: Understanding Varied Responses to MoU Conditionality

This paper, drawing on the Varieties of Capitalism (VoC) theoretical approach to comparative political economy and the institutional theory of Europeanization, with emphasis on aspects of Quality of Government (QoG) and trust, concentrates on accounting for possible variation between Greece and Portugal in response to MoU (Memorandum of Understanding)-based conditionality during the financial and economic crisis. It focuses on the areas of macroeconomic adjustment and structural/labour market reforms. The empirical evidence vindicates the fundamental assumptions of the VoC approach with regard to the impact of variation of economic performance among member states of the Eurozone according to their models of capitalism, in conjunction with ‘fundamental weaknesses’ in the construction of the Euro. However, quality of government is identified as a key explanatory variable for variation in the adaptation capacity of Greece and Portugal, especially during the period of crisis. Additionally, there seems to be no evidence that cultural aspects, such as the level of social trust/ capital, can account for variation in adaptation performance between the two countries.