Germany's Euro Crisis: Preferences, Management, and Contingencies

Abstract

This article applies Moravscik's ideational liberalism to outline domestic and international influences on German state preference formation since the introduction of the euro and discusses the trends that distinguish German policy making and why they matter in the development of sustainable solutions to the ongoing euro crisis. The German government's ideational commitments to the European project and ordoliberal principles are found to be significant determinants in preference formation, but while its commitment to Europe has remained stable over time, its commitment to ordoliberalism has wavered. The government prefers to advance European integration in line with ordoliberal principles, though in times of crisis it hardens its ordoliberal stance. This article argues that Germany will go to great lengths to keep the Eurozone intact because it is part of a grand political project, but the government's prescription for fiscal austerity, which is underpinned by ordoliberal principles, sometimes exacerbates the euro crisis. Policy recommendations that favour flexibility are offered for Germany and other Eurozone countries.