The banking crisis of 2008/2009 and the subsequent sovereign-debt crisis in the European Union had a profound and destructive impact on in a number of countries including Greece, Ireland, Italy, The Netherlands, Portugal, Romania, Slovakia and Spain. In other countries cabinets have remained firmly in control, although they had to announce deeply unpopular austerity packages. The political ‘mechanisms’ linking exogenous shocks (such as economic crises) and cabinet stability are still a matter for discussion. In this paper I will use the ERD dataset generated by Andersson, Bergman and Ersson to test hypotheses derived from Lupia and Strøm’s model of strategic cabinet termination (focusing on the conditions for political institutions to influence the costs of governing under the impact of exogenous shocks such as economic crises). Data from 28 European parliamentary democracies for the period 1945-2011 show that strong increases in unemployment were particularly destructive for European cabinets in this period, whereas the impact of inflation seems to be mitigated by political and strategic factors. Duration-dependent effects – unemployment increasing the risk of early elections towards the end of a parliamentary term and increasing the risk of nonelectoral cabinet replacements at its beginning – are small but significant, corroborating some of the strategic predictions of the Lupia-Strøm model.
