List of Figues. List of Tables Preface and Acknowledgments Introduction 1.1. The controversy over trust 1.2. Research questions 1.3. Methodology and research design 1.4. The concept and measurement of trust 1.5. The argument in a nutshell 1.6. Summary of chapters Institutional Trust and Individual Decision Making 2.1. Theories of expectations 2.1.1. Rational expectations 2.1.2. Austrian and Post-Keynesian approaches to expectations 2.2. The concept of uncertainty 2.3. The role of institutions in reducing uncertainty 2.4. Compliance and legitimacy 2.4.1. Tax compliance 2.5. Institutional trust and individual planning Institutional Trust and Policymaking in the EU 3.1. Unique and recurrent decisions: the rationality of policymakers 3.2. The de-politicization of money in the EMU 3.2.1. The collapse of Bretton Woods and its turbulent aftermath. 3.2.2. The creation of the Single market 3.2.3. Learning monetary cooperation: lessons from history 3.2.4. A technocratic approach to the de-politicization of money 3.2.5. Self-imposed commitments for sound money 3.2.6. Tensions within the arrangement—the role of fiscal policy 3.3. Policy choices within the euro-zone: the role of trust 3.3.1. Fiscal policy, growth, and trust 3.3.2. The difficulties of reform 3.3.3. Implications for fiscal consolidation 3.3.4. Implications for adjustment within the EMU 3.4. Prospects after the euro—hypotheses Fiscal Developments in the EU-15, 1992–2007 4.1. The EMS crisis—the start of the convergence period 4.2. The working of the EMU fiscal rules 4.3. Motives for change: internal commitment vs. external anchor 4.4. Institutional quality in the EU-15 4.5. Approaches to fiscal consolidation 4.6. Virtuous and vicious cycles at work: Sweden vs. Portugal 4.6.1. Institutional conditions 4.6.2. Fiscal policy and growth following the EMS crisis 4.6.3. The political economy of fiscal reforms The Maastricht Process in the CEE-10 5.1. An environment of distrust 5.1.1. Paternalism and rule of law under communism 5.1.2. The heritage of transition 5.2. The role of external constraints in an environment of distrust 5.2.1. International financial markets 5.2.2. The EU as an anchor 5.2.3. The Maastricht process as an anchor. 5.3. Institutional quality and exchange rate choice 5.4. The impact of distrust on economic policy in the CEE-10 5.4.1. Fiscal policy in the CEE-10, 2002–2007 5.4.2. Credit developments in the CEE-10, 2002–2008 5.4.3. Assessment 5.5. Reforms without trust: Hungary vs Slovakia 5.5.1. Roots of distrust 5.5.2. Vicious cycles in Hungary 5.5.3. From isolation to star performer: reforms in Slovakia 5.5.4. The political economy of reforms in a low-trust environment Financial Crisis in the EU-25 6.1. The origins of the subprime crisis 6.2. The crisis in the EU 6.3. Consequences of the crisis in the EU-25 6.3.1. Growth 6.3.2. Public debt 6.3.3. Unemployment 6.3.4. Assessment of crisis performance 6.4. Surprising cases: Ireland vs Poland 6.4.1. Ireland 6.4.2. Poland 6.4.3. Implications for the theory The Relevance of Trust for Economic Outcomes 7.1. Summary of findings 7.2. Differences between East and West 7.3. Institutional trust and economic consequences 7.3.1. High-trust countries in the euro-zone 7.3.2. High-trust countries outside the euro-zone 7.3.3. Low-trust countries in the euro-zone 7.3.4. Low-trust countries outside the euro-zone 7.4. Factors modifying the influence of trust 7.4.1. Initial level of development 7.4.2. International financial market pressures 7.4.3. Overconfidence 7.4.4. Economic ideas 7.4.5. Leadership 7.5. Implications for policy 7.5.1. The future of the euro-zone 7.5.2. Accession of CEE countries to the euro-zone 7.5.3. The political economy of policy reforms 7.6. Conclusions Bibliography Index