Economic ideas, party politics, or material interests? Explaining Germany’s support for the EU corona recovery plan

Abstract

Why did the German government champion a debt-financed and grants-based EU corona recovery plan, despite the country's traditional aversion towards greater fiscal risk-sharing in Europe? To elucidate this question, this article critically assesses different explanatory factors cited in the academic literature and public debate to determine a country's response to pressing challenges. Tracing Germany's approach to the corona pandemic within the EU context, it finds that national material interests rather than (new) economic ideas or party politics were decisive. The timing, scope, as well as the limits of the German-inspired recovery plan for the fight against the corona crisis suggests at least as much continuity as change in Germany's position on EU fiscal policy. Yet, the findings also highlight Germany's enduring, and in fact reinforced, commitment to European integration and its preparedness to provide stability in moments of deep crisis for the EU.

The Berlin puzzle: Why European solidarity prevailed in the adoption of the Corona recovery fund

“…Both material factors (avoiding enormous economic costs due to negative interdependence) and non‐material factors and mechanisms (adhering to the normative expectations raised by crisis framing) are needed to fully explain the German change in position on the EU recovery fund. Thereby our argument differs from existing explanations by showing how material and ideational factors complement each other rather than assuming that crisis perceptions causally precede material considerations (Crespy & Schramm, 2021) or ignoring ideational considerations altogether (Schramm, 2023). Furthermore, by comparing the Corona crisis to the Euro crisis, we were able to identify conditions under which perceptions and frames influence member state preferences.…”

“…Debtor states, by contrast, called for more extensive joint European action, among others through the introduction of common debt instruments, such as Eurobonds. In the context of the Corona pandemic, the German government's preferences for a limited European fiscal policy have remained largely intact (Schramm, 2023). Initially, it positioned itself clearly in the camp opposing fiscal burden‐sharing (Krotz & Schramm, 2022).…”

“…As the pandemic unfolded, the German government shifted its position and came to support a fiscally more ambitious response. Unlike in the Euro crisis, policy makers in Germany had come to realise that the fiscal and economic costs of the crisis were more symmetrically distributed across the EU, which made a joint crisis response necessary (see Schramm, 2023), because nothing less than preserving the functioning of the Single Market was at stake (Becker, 2022; Bulmer, 2022, p. 176; Schelkle, 2021: 47). What is striking from this perspective, though, is the speed with which the German government changed course in the spring of 2020, at a time when a majority of major economic interest groups and peak associations were vocally sceptic of fiscal burden‐sharing measures.…”

NextGenerationEU and the Future of the European Monetary Union: Shifting Interests and New Fractures in the German Power Bloc

“…Yet, whilst highlighting how the specific design of the EMU has benefitted Germany's export‐dependent growth model (Höpner and Lutter 2018; Schoeller and Karlsson 2021), these contributions do not explain why the BDI, the main lobby of Germany's export‐oriented capital, has been particularly open towards EMU reform (cf. Schramm 2023 for an exception). Other contributions (Heine and Sablowski 2013; Hacker and Koch 2016) draw a nuanced picture of the constellation of actors in Germany but largely focus on the period of acute crisis management as well as on the external communication of selected actors.…”

Federal Challenges in the Implementation of the EU’s Recovery and Resilience Facility in Germany

“…In approving the ARF, the federal government also pursued national interests (Schramm, 2021). It recognized the ARF early on as an opportunity to refinance at least parts of its extensive June 2020 economic stimulus program.…”