Disintegrating European Austerity in Greece and Germany

Towards a New Political Economy of Development

“…Germany has long been recognised as a dominant power within European Monetary Union (EMU) but the crisis has brought Germany 'centre stage' and as a consequence its dominance has been subject to much greater critical scrutiny (e.g. Aglietta 2012; Anderson 2012; Bellofiore et al 2011;Bibow 2013aBibow , 2013bHabermas 2013;Offe 2013;Pitty 2014). Described by one leading scholar as both a 'semi-sovereign' state and at best a 'reluctant hegemon' (Paterson 2010a(Paterson , 2010b, Germany has been able to exercise power in the eurozone (and in the European Union) not through decisive political leadership (Germany, from externally and internally imposed necessities, having being obligated to the 'shield' of the French-German axis) but primarily because of its economic preeminence.…”

“…As a consequence of growing economic and political tension between the relatively weak eurozone states and Germany, fundamental questions have been raised both about the efficacy of the 'German model', especially for the dominated states, and concomitantly about the future of the euro itself, seen by some critics as an authoritarian, supranationally and executively imposed, support for German power, largely, if not entirely, lacking in democratic or popular legitimacy (Habermas 2013;Offe 2012;Patomaki 2013: 108-14;Pitty 2014). Against this backdrop sovereign exits from the euro (which was supposed to be unthinkable) leading to a partial or complete breakup of the single currency are now regarded and genuine close time possibilities and are discussed as serious democratic/strategic policy options for some states (Lapavitsas 2012).…”

“…For eurozone policy makers, seeking to both stabilise the debt crisis while looking to construct a feasible roadmap for reform aimed at strengthening the euro in the long-term, Germany's dominant position within the single currency -what some have dubbed the 'German Problem' (Berggruen and Gardels 2013: 135-7) -has presented a significant dilemma: Given its position of economic dominance within Europe, a euro without Germany is inconceivable; push too much against ordoliberal EMU and a weakened euro might unravel with Germany's conditional commitment to the single currency conceivably reaching a breaking point; push too hard in defending ordoliberalism and the euro's future is threatened by revolts from the eurozone's southern periphery where the imposition of austerity has in some cases led to economic collapse and depression and the subsequent growth of politicised opposition to both Germany and the euro (Pitty 2014 Commission 2012). For eurozone policy makers, beyond dealing with the debt crisis the search is for a feasible reform path, one that accommodates, consolidates and embeds the German growth model within the eurozone as a whole, while at the same time strengthening the scope and preferably scale of the single currency rather than undermining it.…”