Has Germany been Europeanised or has Europe become (too) Germanic?: The Consequences of EMU without a proper European economic governance system

Intereconomics

Volumn 40, Issue 5, 2005, Pages 285-291

  Heise, Arne ^a  

^a UNIVERSITY OF HAMBURG   (Germany)

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EID: 33746925566     PISSN: 00205346     EISSN: 1613964X     Source Type: Journal    
DOI: 10.1007/s10272-005-0158-z     Document Type: Article

References (54)

1. The literature list is long and the subtle diversity of the arguments is impressive. Cf. for example K. Middlemas: Orchestrating Europe, New York 1995
2. W. Sandholtz: Choosing Union: Monetary Politics and Maastricht, in: International Organization, Vol. 47, No.1, 1993, pp. 31-34
3. J. Grieco: The Maastricht Treaty, Economic and Monetary Union and the Neo-Realist Research Programme; in: Review of International Studies, Vol. 21, 1995, pp. 21-40
4. G. Garrett: The Politics of Maastricht; in: Economics and Politics, Vol. 5, No. 2, 1993, pp. 105-124
5. E. Pond: Beyond the Wall: Germany's Road to Unification, Washington 1993.
6. F. W. Scharpf: Negative and Positive Integration in the Political Economy of European Welfare States, in: G. Marks, F. W. Scharpf, P. C. Schmitter, W. Streeck: Governance in the European Union, London 1996, pp. 15-39, here p. 15.
7. Cf. F. W. Scharpf: Games Real Actors Play. Actor-Centered Institutionalism in Policy Research, Boulder 1997, p. 210.
8. P. Genschel: Globalization, Tax Competition and the Welfare State; in: Politics and Society, Vol. 30, No. 2, 2002, pp. 245-272.
9. Cf. for example M. E. Streit, W. Mussler: The Economic Constitution of the European Community: From "Rome" to "Maastricht", in: European Law Journal, Vol. 1, 1995, pp. 5-30
10. S. Sinn: Taming the Leviathan: Competition among Governments, in: Constitutional Political Economy, Vol. 3, 1993, pp. 177-221
11. N. Berthold, M. Neumann: Sozialsysteme im Wettbewerb - das Ende der Umverteilung?, in: W. Müller et al. (eds.): Regeln für den europäischen Systemwettbewerb, Marburg 2001, pp. 253-286.
12. Cf. S. Collignon: European Republic. Reflections on the Political Economy of a Future Constitution, London 2003
13. P. C. Schmitter: Imagining the Future of the Euro-Polity with the Help of New Concepts, in: G. Marks, F. W. Scharpf, P. C. Schmitter, W. Streeck, op. cit., pp. 121-150.
14. A. Heise: European Economic Governance - Wirtschaftspolitik jenseits der Nationalstaaten, in: Wirtschaftsdienst, Vol. 85, No. 4, 2005, pp. 230-237.
15. Only very few progressive social scientists and economists were openly critical of EMU or, at least, named the pre-conditions under which EMU was expected to be beneficial to wage earners; see e.g. K. Busch: Europäische Integration und Tarifpolitik: Lohnpolitische Konsequenzen der Wirtschafts- und Währungsunion, Cologne 1994
16. A. Heise, H. Küchle: Globalisierung, Sozialkonkurrenz und Europäische Integration; in: WSI-Mitteilungen, No. 4, 1996, pp. 237-244. Interestingly, it was a Keynesian economist, Prof. Bofinger, who was at the forefront of EMU support and who organised the public counter-attack after conservative economists launched a late attack against EMU in 1998!
17. This hidden agenda can be inferred from a) the bilateral and intergovernmental negotiations, b) the underlying neo-classical economic model and c) the fact that those conservative economists opposing EMU did so on exactly the same grounds - only they feared that EMU would not be strong enough to exert such pressure!
18. Cf. for example A. Moravcsik: The Choice for Europe. Social Purpose and State Power from Messina to Maastricht, Ithaca 1998
19. K. Dyson, K. Featherstone: The Road to Maastricht. Negotiating Economic and Monetary union, Oxford 1999
20. J. Pisani-Ferry: France and EMU: Economic and Political Economy Issues, in: J. Pisani-Ferry, C. Hefeker, A. J. Hughes Hallett: The Political Economy of EMU: France, Germany and the UK, CEPS Paper No. 69, Brussels 1997, pp. 5-38
21. D. Howarth: The French State in the Euro-Zone: 'Modernization' and Legitimizing Dirigisme; in: K. Dyson (ed.): European States and the Euro. Europeanization, Variation, and Convergence, Oxford 2002, pp. 145-172.
22. A. Moravcsik, op. cit., here p. 411.
23. Under the heading "Nous voulons un gouvernement economique au service de la croissance et un vrai budget pour l'Europe" the liberal UDF defines: "Ce gouvernemant economique serait a la fois un soutien et un contrepoids a la Banque Centrale Europeenne, tout en preservant son intependance. Il s'agit de coordonner les politiques monetaires et budgetaire de l'Union, de rapprocher les politiques de change avec l'objectif de lutte contre l'inflation. Surtout, un gouvernement economique fort pourra prendre des mesures sur la fiscalide des entreprises, pour lutter contra le dumping social". Union pour la Democratie Francaise (UDF): Nous avons besoin d'Europe, Conseil national, 15 May 2004, p. 17.
24. "Beregovoy remained a frustrated social radical who suspected that trying to negotiate EMU with Germany would only add to the constraints on French politics. Hence, later, he adopted with enthusiasm the idea of a strong "political pole" to balance the "monetary pole" of EMU (later rechristened gouvernement economic by the Elysee)" (K. Dyson, K. Featherstone, op. cit., p. 175, italics in the original).
25. Former CSU undersecretary in the Finance Ministry and now a leading proponent of the ultra-liberal "Initiative New Social Market Economy".
26. Leading German negotiator in the Intergovernmental Conferences (IGC) and now President of the Federal Republic of Germany.
27. " ..., an ECB has to attend to building and retaining a constituency of political support. In order to meet this requirement, arrangements for democratic accountability of the ECB take on a special importance. This point was grasped in the French Tresor as early as 1988, but played a very secondary role in the negotiations. ... The treaty negotiations were far more preoccupied with criteria of central bank independence than with criteria of transparency and accountability ... On such matters the Maastricht Treaty was unclear and undemanding" (K. Dyson, K. Featherstone, op. cit., p. 786).
28. For the impact of accountability on monetary policy see S. C. W. Eijffinger, M. M. Hoeberichts, E. Schaling: A Theory of Central Bank Accountability, CEPR Discussion Paper No. 2354, London 2000
29. G. M. Carporale, A. Cipollini: The Euro and Monetary Policy Transparency, in: Eastern Economic Journal, Vol. 28, No. 1, 2002, pp. 59-70.
30. The Domar formula of sustainable public deficits produces 3% under the assumption of stabilising 60% of public debts (over the business cycle) and an average nominal GDP growth rate of 5%. In this scenerio, 3% is clearly not the upper limit of public deficits but the average over the business cycle; see e.g. A. Heise: Einführung in die Wirtschaftspolitik. Grundlagen, Institutionen, Paradigmen, Munich 2005.
31. Deputy chair of the Bavarian sister party of the CDU, the Christian Social Union (CSU), which signalled reluctance towards EMU if budgetary policy were not tightened.
32. This is particularly true, as the "excessive deficit" of Germany and France is not due to massive public expenditure (i.e. active fiscal policy) but to shortfalls in public incomes because of tax redemption programmes and a slack economy (i.e. passive fiscal deficit); see e.g. A. Heise: Optimal public debts, sustainable deficits, and budgetary consolidation; in: Empirica, No. 2, 2002, pp. 319-332.
33. Cf. for example A. Heise: Boosting Employment through Macro Policies?, in: L. Witte (ed.): Work and Welfare in the Enlarging Euroland, Bonn 2002, pp. 63-74.
34. Which has become known as the "Luxembourg process".
35. Which has become known as the "Cardiff process".
36. Cf. A. Heise: European Economic Governance - Wirtschaftspolitik jenseits der Nationalstaaten, op. cit.
37. D. Howarth, op. cit.
38. Dyson even argues that a "key motive of the German Foreign Ministry in taking the lead role in agenda-setting on EMU in 1988 had been to put a final end to German hegemony within the EMS and thereby to put European unification on a more secure political footing." K. Dyson: The Politics of the Euro-Zone. Stability or Breakdown?, Oxford 2000, p. 255. However, my argument would rather be that Germany has succeeded in lifting up its ideational "hegemonic position" from a fragile system of cooperation (within EMS) to a well established institutional regime (EMU).
39. K. Dyson, K. Featherstone, op. cit., p. 428.
40. The "German model" comprises highly corporatist employers' and employees' organisations, consensual industrial relations, centralised collective bargaining and an interventionist Keynesian welfare state resulting in comparatively high levels of productivity growth, low inflation and unemployment and, to the detriment of real and human capital owners, rather low wage and income dispersion. It seems that it was exactly this outcome which the policies of "sound money" and "sound finance" targeted, while leaving German industrial relations and collective bargaining institutions (the foundation of German success in high-skilled, high-productivity industries) nearly unaltered (see e.g. A. Heise: The Political Economy of Meritocracy; in: Political Economy, Fasc. 6, 2000, pp. 109-136
41. and A. Heise: Grenzen der Deregulierung. Institutioneller und struktureller Wandel in Grossbritannien und Deutschland, Berlin 1999, for the institutional stability in Germany under the conservative-liberal Kohl administrations as compared to the radical changes of the British labour market system under Margaret Thatcher).
42. T. Hueglin: Government, Governance, Governmentality. Understanding the EU as a project of universalism, in: B. Kohler-Koch, R. Eising (eds.): The Transformation of Governance in the European Union, London/New York 1999, pp. 249-266, here p. 264.
43. K. Dyson: Conclusions: European States and Euro Economic Governance; in: K. Dyson (ed.): European States and the Euro, op. cit., p. 359f.
44. Cf. footnote 27.
45. This may look different from the perspective of a single country, but is definitely true for the whole of Europe. And it sometimes looks very odd when the country most dependent on Germany - namely Austria - pleads for Germany to pursue an even more restrictive fiscal policy stance.
46. M. Rhodes: Why EMU is - or may be - good for European Welfare States; in: K. Dyson (ed.): European States and the Euro, op. cit., p. 333.
47. Of course, one must admit that Rhodes' statement was made only very shortly after monetary union started, i.e. without the years of experience that we have now.
48. K. Dyson: Conclusions: European States and Euro Economic Governance, op. cit., p. 341.
49. For an introduction to the history, working and shortcomings of the EMD read an insider-report: W. Koll: Macroeconomic Dialogue - development and intentions, in: E. Hein, T. Niechoj, T. Schulten, A. Truger (eds.): Macroeconomic policy coordination in Europe and the role of the trade unions, Brussels 2005, pp. 175-212.
50. Lafontaine's resignation symbolised the defeat of a clear policy shift towards more interventionist policies. Thereafter, "third way politics" or, as it has been called, "left supply-side politics" (see B. Priddat: Linke Angebotspolitik?, in: W. Schroeder (ed.): Neue Balance zwischen Markt und Staat?, Schwalbach/Ts. 2001, pp. 99-115) dominated the political agenda in Germany and the German approach to economic policy-making at EU level.
51. Including non-credible material and more effective immaterial sanctions such as a loss of reputation.
52. For a most recent and very detailed account of the arguments see the symposium "Reforming Fiscal Policy Co-ordination under EMU: What Should Become of the Stability and Growth Pact", in: Journal of Common Market Studies, Vol. 42, No. 5, 2004, pp. 1023-1059.
53. Cf. European Council: Report of ECOFIN on "Improving the implementation of the Stability and Growth Pact" to the European Council, 7423/05, Brussels 2005.
54. Cf. K. Dyson: The Politics of the Euro-Zone, op. cit., pp. 251 ff.