The German impasse

by Adam Tooze – November 12, 2019

Adam Tooze dissects how the macroeconomic policy discourse is disabling necessary German, and European, steps forward.

The autumn of 2019 is a moment of anniversaries. The 30th anniversary of German unification has garnered much attention. Rather less remarked upon has been the ten-year anniversary of the eurozone crisis. It was in the autumn of 2009 that the Greek government shocked the world by announcing the scale of its budget manipulation.

Today the bond markets are calm. Greece recently issued debt at negative yields. But the politics of the eurozone continue to be turbulent and the unified Germany, by far the largest eurozone member, continues to be at the heart of it.

This year we have seen a battle over a budget for the eurozone. The decision by the European Central Bank in September to relaunch quantitative easing has proved highly controversial. Most recently the Germany Finance Ministry, headed by the social democrat Olaf Scholz, has launched an initiative to kick-start the negotiations over banking union.

The unceasing debate on issues of principle points to the unresolved and profoundly political nature of Europe’s monetary union. The set of difficulties is familiar. How to ensure the stability of the system? How to achieve convergence? How to pool risk without encouraging moral hazard? How to avoid a one-way ‘transfer union’?

In part the arguments are defined by structural differences which run along national lines—divisions between creditors and debtors. But they are also a matter of political interpretation. Divisions between left and right and differing visions of Europe are tied up with the representation of interests in a cruder sense.

Originally published in Social Europe. This article is a joint publication by Social Europe and IPS-Journal. Read full article here (subscription may be required).