European countries have been required to formulate a national preference in relation to the EU Financial Transaction Tax. The two leading approaches to explaining how the financial sector makes its views felt in the political process – the structural power of the financial services sector based on potential disinvestment, and its instrumental power arising from direct political lobbying – fall short of providing a comprehensive account.

The missing link is how and why policy-makers might be willing to adopt the priorities of key sectors of the financial services industry. We outline how two levels of ideational power might be at work in shaping outcomes, using Ireland as a case study. We argue firstly that background systems of shared knowledge that are institutionalized in policy networks generated broad ideational convergence between the financial sector and policymakers over the priorities of industrial policy in general. Secondly, and against that backdrop, debate over specific policy choices can leave room for a wider range of disagreement and indeed political and ideational contestation. Irish policymakers proved responsive to industry interests in the case of the FTT, but not for the reasons normally given.

This work seeks to link literatures in two fields of inquiry. It poses questions for liberal intergovernmentalism in suggesting that the translation of structurally grounded material interests into national policy preferences is far from automatic, and argues that this is mediated by ideational considerations that are often under-estimated. It also contributes to our understanding of how constructivist explanations of policy outcomes work in practice, through a detailed case study of how material and ideational interests interact.