Only a decade ago, slow growth and high unemployment plagued Germany, but the "sick man of Europe" has now moved to outperform the Eurozone average growth since the second quarter of 2010. This confirms Germany's recovery and its status as the growth engine of the continent. This surely is a success story. While Germany (also Austria and the Netherlands) is prospering, the peripheral countries in the Eurozone are confronted with a severe sovereign debt crisis. Starting in Greece, it soon spread to countries such as Ireland, Portugal, and Spain. In the course of the debate, Germany was blamed for the imbalances in Europe. In short, German export performance and the sustained pressure for moderate wage increases have provided German exporters with the competitive advantage to dominate trade and capital flows within the Eurozone. Thus, Germany is seen as the main beneficiary of the EURO. This argument, however, is vehemently disputed within Germany. Many economists and political leaders reject this argument and point to the flagrant lack of fiscal discipline in many of the peripheral countries. Some prominent economists, such as Hans-Werner Sinn, even disputes that Germany was the main beneficiary of the Eurozone. The paper analyzes the two sides of the controversy, and asks whether we are witnessing a more inwardlooking and Euroskeptic Germany. These issues will be analyzed by first focusing on the role of Germany in resolving the sovereign debt crisis in Greece, and the European Union negotiations for a permanent rescue mechanism. We conclude by discussing some possible explanations for Germany's more assertive and more Euroskeptic position during these negotiations.
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In German Politics and Society
- Published (Print):
- 01 Mar 2011
- Article Type:
- Research Article
- Pages:
- 1–24 (23 total)
Erik Jones
The bond markets turned on Italy during the first weekend of July 2011
as part of a wider loss of confidence in European efforts to manage the
sovereign debt crisis. On Friday, 1 July, the difference—or “spread”—
between Italian and German 10-year government bond yields was 178
basis points or 1.78 percent. The following Monday, 4 July, it was up
to 183 basis points and rising. By Friday, 8 July, the spread was 237
basis points. It remained above that level to the end of the year.1 The
center-right government led by Silvio Berlusconi attempted to head
off this change in sentiment by pushing through successive reform
packages to promote fiscal consolidation and stimulate growth. Bond
traders consistently shrugged off these actions as too little, too late.
Ultimately, the pressure became so great that the center-right coalition
fractured and President Giorgio Napolitano replaced Berlusconi’s
Cabinet with a technocratic government headed by Mario Monti. Even
this, however, was not enough to appease the markets, and the year
ended with Italian bond yields again rising..
In Italian Politics
- Published (Print):
- 01 Sep 2012
- Article Type:
- Research Article
- Pages:
- 172–190 (19 total)
Stefano Sacchi
This chapter deals with two momentous structural reforms introduced by the Monti government in the social policy field: the pension reform approved in late 2011 and the labor market reform passed in July 2012. Alongside discussing the content of these two reforms and their plausible policy impact, the chapter places them in the context of the Italian sovereign debt crisis and shows how they were introduced due to pressures exerted by international and supra-national actors. The analysis focuses in particular on the policy-making process of the labor market reform, reconstructing the various stages it went through. All this took place in the context of a new policy style by the Monti government, which forced decisions in the shadow of hierarchy and even took unilateral action, pursuing its policy objectives under the legitimacy provided by the international actors and the sense of urgency stemming from the sovereign debt crisis.
In Italian Politics
- Published (Print):
- 01 Sep 2013
- Article Type:
- Research Article
- Pages:
- 207–226 (20 total)
Lucia Quaglia
The financial woes experienced by the Monte dei Paschi di Siena (MPS) and by a handful of other Italian banks in which foundations have played a prominent role offer an opportunity to reflect on three interrelated topics. The first issue is the evolution of the Italian banking system and banking legislation over the past decades to explain the rather distinctive governance structure of these banks. The second issue is the unfolding of the sovereign debt crisis in the euro area, which set the broader context in which the MPS scandal and the subsequent financial troubles of other banks took place. The third issue is the main response of the European Union and euro area to the sovereign debt crisis, namely, the proposal to create an EU banking union, which in turn triggered strong supervisory actions by the Bank of Italy in preparation for the handover of banking supervision to the European Central Bank.
In Italian Politics
- Published (Print):
- 01 Sep 2014
- Article Type:
- Research Article
- Pages:
- 216–232 (17 total)
Rainer Hillebrand
This article looks critically at the widely held view that Germany has not done enough to help overcome the Eurozone crisis. According to this line of argument, Germany has refused to comprehensively bail out crisis countries, offer mutual support in order to counter speculative attacks or endorse demand-side growth policies. This is allegedly because of a more narrowly defined national self-interest, increased EU-skepticism, and hegemonic ambitions. This article takes the perspective that such criticisms are primarily rooted in a Keynesian reading of the Eurozone troubles, whereas German policies are informed by another rationale: the ideas of so-called ordoliberalism. Generally, this traditional German school emphasizes the importance of principles, rule-based behavior, and long-term goals—and it believes in the (microeconomic) functioning of markets. Consequently, ordoliberals perceive the crisis as resulting from unsustainable debt levels and a lack of competitiveness in southern Europe, concomitant with a failure of Eurozone institutions. Based on this diagnosis, policy proposals are primarily targeted at debt reduction, as well as structural and EU institutional reforms. While Germany's crisis policy thus appears rational from an ordoliberal perspective, it is considered to be at variance with, and inadequate from the viewpoint of a Keynesian approach.
In German Politics and Society
- Published (Print):
- 01 Jun 2015
- Article Type:
- Research Article
- Pages:
- 6–24 (18 total)
Christian Schweiger
Throughout the past decade, the European Union has witnessed substantial and multiple crises. The 2008 global financial crisis was followed by the triple banking, economic, and sovereign debt crisis in selected Eurozone (and non
In German Politics and Society
- Published (Print):
- 01 Jun 2018
- Article Type:
- Research Article
- Pages:
- 100–117 (18 total)
Luke B. Wood
European Sovereign Debt Crisis. 30 Rather, the problem with the reluctant hegemony paradigm lies within its failure to adequately satisfy a core requirement of hegemony, namely military or coercive power or, at a minimum, coercive capacity. Scholars in
In German Politics and Society
- Published (Print):
- 01 Dec 2019
- Article Type:
- Research Article
- Pages:
- 95–108 (14 total)
Kenneth Dyson and Lucia Quaglia
After prolonged negotiations, on 24 June 2011, the governor of the
Bank of Italy, Mario Draghi, was appointed president of the European
Central Bank (ECB) as successor to Jean-Claude Trichet. His mandate
runs from 1 November 2011 to 31 October 2019. Draghi’s appointment
was consistent with a long-standing practice of Italian politicians and
officials seeking to engage with the process of European integration
by ensuring that they were “sitting at the European top table.” In the
context of the euro area, sitting at the top table for Italy was initially
about gaining euro entry as a founding member state in 1999 and,
subsequently, about having strong Italian representation in the governing
structures of the euro area, particularly the ECB. Once the
sovereign debt crisis became contagious in 2010–2011, it meant ensuring
that financial markets drew a clear distinction between Italy and
periphery member states such as Greece and Portugal that suffered
from sovereign debt distress.
In Italian Politics
- Published (Print):
- 01 Sep 2012
- Article Type:
- Research Article
- Pages:
- 155–171 (17 total)
Andrea Pedrazzani and Luca Pinto
In November 2011, when the Italian sovereign debt crisis reached its peak, the Berlusconi IV government was replaced by a “caretaker” cabinet headed by Mario Monti. Composed exclusively of non-partisan ministers, the Monti government represents a clear deviation from how parliamentary democracies are generally expected to work. This chapter analyzes the activity and functioning of the Italian Parliament during the 13 months in which Monti remained in office. Compared to the previous government, we find that, quantitatively, the legislative production between the two executives is not significantly different, although the legislative process during the Monti government appears to have been faster. Not surprisingly, from the qualitative point of view, the bills passed during the caretaker government focused mainly on economic topics. Our findings suggest that the apparent broad consensus on Monti's agenda masked important differences between the main parties that supported the government.
In Italian Politics
- Published (Print):
- 01 Sep 2013
- Article Type:
- Research Article
- Pages:
- 153–172 (20 total)
Francesco Stolfi
Having inherited high and increasing interest rates on public debt from its predecessor, the Monti government had to bring these yields down to sustainable levels and to push through the reforms that the Berlusconi government had abandoned. This article discusses the strategies that the Monti government employed to achieve these goals. It also analyzes the government?s international actions and finds that its international credibility was a subtle but significant asset. Although it did not necessarily acquire greater flexibility in its dealings with Italy?s international partners, the Monti government engaged in negotiations with the German government and the European Central Bank in an effort to help to defuse the Italian (and European) government debt crisis.
In Italian Politics
- Published (Print):
- 01 Sep 2013
- Article Type:
- Research Article
- Pages:
- 173–187 (15 total)