Abstract
This article examines selected political party positions on a Eurozone budget and fiscal transfers between 2018 and 2021. It posits that German government positions on common European debt and fiscal policy have undergone a significant but fragile shift. It must contend with continued domestic hostility before it can be said to be a lasting realignment. A great deal with depend less on the Social Democratic Party that is largely responsible for bringing it about with the support of German Greens, and more on the willingness of the Christian Democratic Union, their Bavarian sister party the Christian Social Union and the German voting public to adopt a more interventionist fiscal policy as well, generating shared commitments to economic policy at home and in Europe. That has not happened yet.
Highlights
PuzzleHow much of a shift has taken place in Germany’s policies on the structure, rules, and institutions of the Eurozone? What kind of impact have German preferences had on the 2020 negotiations over the EU budget and the complementary Recovery and Resilience Facility? How should its collaboration with France over these issues best be understood? And how is Germany’s stance likely to evolve into the future?Germany’s relaxation of its role as anchor of the single currency and proponent of fiscal discipline was significant in mid-2020, bringing it closer to France and Southern European positions supporting common debt and fiscal capacity
The plan envisaged five hundred billion euros of grants to be distributed across the EU, financed through the issuance of common debt, a measure that previous German governments had refused to contemplate on principle. This borrowing and redistribution would come on top of another €250 billion raised by the European Commission and lent to the member states, as well as loans organized by the European Investment Bank which were already earmarked for investment in greener and more cohesive economic activity (European Investment Bank, 2021)
We look to determine how much short-term policy entrepreneurship takes place in the absence of strong domestic political demand, driven by policy expertise and attempts to coordinate solutions that manage the country’s interdependence with others on a mutually voluntary basis
Summary
How much of a shift has taken place in Germany’s policies on the structure, rules, and institutions of the Eurozone? What kind of impact have German preferences had on the 2020 negotiations over the EU budget and the complementary Recovery and Resilience Facility (the Rescue Plan)? How should its collaboration with France over these issues best be understood? And how is Germany’s stance likely to evolve into the future?. The volume of grants was negotiated down to €390 billion in July 2020 and transfers came into question, this opposition came from a small coalition led by the Netherlands rather than Germany itself While these developments cannot be considered German support for a Hamiltonian moment of European fiscal federalism, they cross the Rubicon of fiscal transfers between states and common debt for the first time. This article seeks to answer these questions by focusing on the ideational positions of the Social Democratic Party (SPD) and the Christian Democratic Union/Christian Social Union (CDU/CSU) parties, with attention to selected leadership and public opinion allies in particular, supplemented by public opinion data It focuses on the opportunities and constraints in Germany for the Finance Minister to bring about a shift in the country’s macroeconomic policy stance on EMU, including the issue of EU financial transfers. It begins by assessing the state of the literature regarding German preferences and negotiation strategies in EMU, which largely matches the record through March of 2018, and moves on to assess how much change has occurred since and why
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