Germany in the Eurozone Crisis: Paradoxes of a Stealth Hegemon

The crisis of the Eurozone fundamentally changed power relations in the EU.  Many observers but in particular the public at large in most European countries see Germany as the new powerhouse in Europe that imposes drastic reforms to crisis-prone economies and also dictates the fundamental transformation of the political and economic architecture of the EU. Others see Germany as a political leader that only hesitantly is willing to take up the challenges and provide guiding input to the ongoing crisis management. The paper argues that Germany’s crisis management strategy from the beginning of the Eurozone crisis is dependent from domestic policy considerations. The German coalition government has to take into consideration and to find compromises with opposition parties and thus the Parliament as well, and probably more important, with the German Bundesbank and the Supreme Court. Both institutions have become critical players in regards to the makeover of the EU and the planned changes in the Eurozone architecture.

The paper will argue that the outcome of this domestic game has unfortunate implications for the set-up of the new architecture of the Eurozone, and even has the potential to undermine the ‘survival capacities’ of the Eurozone. Giving domestic considerations priority in the crisis management in combinatikn with the srong demand for German leadership may move the EU on a instable trajectyory.