Germany's approach to the euro crisis: why Berlin does not mind being unpopular
With the EU agreeing to a second Greek bail out, the spotlight is on the delicate balance between demands for fiscal rectitude and the argument that growth needs flexibility.
Berlin thinks the only solution to the crisis is a German one, and that means fiscal rectitude above all else. It also has the power to enforce its will. January’s agreement over the wording of a new treaty aimed primarily at tightening Eurozone fiscal policy shows that German positions rather than collective compromise wins the day.
But – with Germany being criticised for inflexibility over the role of the ECB, Eurobonds, austerity and treaty changes – why does Mrs Merkel take such a consistently hard line?
A new ECFR paper by Sebastian Dullien and Ulrike Guerot – ‘The long shadow of ordoliberalism: Germany’s approach to the euro crisis’ – argues that:
Click here to download a PDF of ‘The long shadow of ordoliberalism: Germany’s approach to the euro crisis’.
“Mainstream German opinion believes that harsh austerity measures are the key to breaking the cycle of debt and the threat of insolvency, reassuring the private sector and thus triggering natural and sustainable growth. Arguing about this will not change their mind.” Sebastian Dullien
“Even a change in the German government would not alter Berlin’s commitment to imposing austerity. The rest of Europe must understand this and find other areas for compromise, such as the timescale for balancing budgets.” Ulrike Guerot.
This paper is part of ECFR's Germany in Europe project, which examines the changing role of Germany within the EU, and the implications for Germany, Germany's European partners, and Europe's place in the world. The Germany in Europe project is supported by Stiftung Mercator.
ECFR is also running a Reinventing Europe project, looking at how Europe can rethink its medium to long term future once the immediate crisis recedes. The Reinventing Europe project is supported by Steven Heinz.