Europeanisation of German Economic Policies: Testing the Limits of Model Germany
| DOI | 10.1177/095207670201700206 |
| Date | 01 April 2002 |
| Author | Kenneth Dyson |
| Published date | 01 April 2002 |
| Subject Matter | Articles |
Europeanisation
of
German
Economic
Policies:
Testing
the
Limits
of
Model
Germany
Kenneth
Dyson
University
of
Bradford
Abstract
This
article
examines
the
complex
effects
-
cognitive
and
material,
direct
and
indirect
-
of
the
European
Union
on
German
economic
policies,
with
particular
reference
to
the
government
of
Gerhard
Schroder
(1998-2002)
and
to
Economic
and
Monetary
Union.
Particular
attention
is
paid
to
the
questions
of
institutional
fit
and
misfit,
of
changing
domestic
opportunity
structures,
and
of
whether
Europeanisation
has
been
important
in
reshaping
domestic
preferences
or
in
altering
the
context
of
domestic
action.
The
changing
context
of
domestic
action
raises
in
turn
the
question
of
whether
Europeanisation
is
displacing
the
German
model
of
'managed'
capitalism.
Two
variables
are
identified
as
central
in
answering
this
question:
the
nature
of
domestic
governing
style
and
the
extent
of
commitment
to
'negotiation'
democracy
over
majoritarian
democracy
and
the
continuing
loyalty
of
German
firms
to
this
model.
Introduction
Germany's
experience
with
Economic
and
Monetary
Union
(EMU)
underlines
just
how
complex,
dynamic
and
interactive
the
process
of
Europeanisation
is
and
the
extent
to
which
it
has
generated
unanticipated
consequences.
In
the
creation
of
EMU
Germany
was
able
to
play
the
role
of
pace-setter
in
a
classic
way,
based
on
its
capacity
to
upload
its
own
policy
preferences
and
institutional
practices
to
the
level
of
the
European
Union
(EU).
This
capacity
rested
on
an
essentially
hegemonic
position
for
the
Bundesbank
within
European
monetary
policies
and
the
D-Mark'
s
role
as
the
anchor
of
stability
within
the
Exchange-Rate
Mechanism
(ERM)
since
1979
(Dyson,
1994).
EMU
represented
'bottom-up'
Europeanisation
in
the
form
of
the
'uploading'
of
German
ideas
and
practices.
Germany's
incentives
for
playing
this
'pace
setter'
role
were
complex.
At
the
level
of
'high'
politics
they
involved
enhanced
security
by
minimizing
the
adaptational
problems
of
Public
Policy
and
Administration
Volume
17
No.
2
Summer
2002
87
other
European
states
to
a
sudden
and
unexpected
German
unification.
This
took
the
form
of
a
clear
and
irrevocable
demonstration
of
the
political
will
to
complete
European
unification
(Dyson
and
Featherstone,
1999).
The
economic
incentive
was
to
capitalize
on
the
existing
commercial
advantages
that
Germany
gained
through
a
single
European
market
by
securing
exchange-rate
stability.
In
consequence,
EMU
seemed
a
case
of
'goodness
of
fit',
with
minimal
adaptational
problems
for
Germany.
Europeanisation
seemed
likely
to
reinforce
continuities
in
German
economic
policies
rather
than
act
as
a
catalyst
for
domestic
policy
and
political
changes.
For
a
number
of
reasons
these
preconditions
and
expectations
were
soon
put
in
question.
First
and
foremost,
with
a
single
monetary
policy
Germany
lost
the
key
relative
advantage
of
lower
interest
rates
vis-a-vis
other
EU
states.
In
consequence,
other
countries
benefited
from
a
greater
stimulus
both
to
investment
and
to
budget
deficit
reduction
via
lower
debt
servicing
charges.
The
result
was
a
more
substantial
improvement
in
their
economic
and
fiscal
performance
and
a
growing
perception
that
Germany
was
a
key
problem
within
EMU,
no
longer
a
pacesetter
but
increasingly
a
laggard.
In
2002
this
came
to
a
head
over
the
European
Commission's
threat
of
a
formal
warning
to
the
German
government
about
its
fiscal
performance
in
relation
to
the
Stability
and
Growth
Pact.
Germany
no
longer
appeared
as
the
model
pupil
in
the
EMU
class.
Second,
the
EMU
of
12
states
that
was
created
in
1998-99
was
larger
than
the
EMU
of 5-6
states
clustered
around
France
and
Germany
that
most
observers
and
policy
professionals
had
expected
in
1995-96.
In
consequence,
the
monetary
policy
of
the
European
Central
Bank
(ECB)
was
less
oriented
around
German
interests
and
took
greater
account
of
potential
inflationary
pressures
in
other
states.
During
the
Schroder
government
of
1998-2002
Germany
found
itself
with
a
tighter
monetary
policy
than
its
position
in
the
economic
cycle
warranted.
The
result
of
these
two
factors
(a
pro-cyclical
monetary
policy
for
Germany
and
a
relative
improvement
of
performance
by
most
neighbours),
plus
a
weak
euro,
was
a
heavy
reliance
on
the
German
exporting
sector
to
reduce
unemployment.
The
result
was
a
'misfit'
issue
that
caused
political
problems
for
the
Schroder
government,
especially
for
the
Social
Democratic
Party
in
an
election
year.
Deprived
of
the
domestic
mechanism
of
interest
rate
change,
and
faced
with
the
novel
situation
for
Germany
of
a
top-down
inappropriate
monetary
policy,
the
onus
was
on
structural
reforms
to
labour,
goods
and
services
markets
and
to
the
welfare
state
to
speed
economic
adjustment
and
reduce
employment
costs.
These
pressures
ran
up
against
powerfully
organized
domestic
interests,
notably
in
labour
market
and
welfare
state
policies
where
social
partnership
was
strongly
entrenched.
What
was
most
striking
was
the
strategic
constraints
on
the
German
government
in
dealing
with
the
resultant
issues
(see
here
Hirschman,
1970).
'Exit'
was
not
a
viable
option
when
Germany
had
invested
so
much
in
EMU
and
Germany's
most
fundamental
national
interests
were
bound
up
with
EMU.
'Voice'
was
Public
Policy
and
Administration
Volume
17
No.
2
Summer
2002
88
To continue reading
Request your trial