Is the German Rule-Based Ordoliberalism the Solution to the Euro-crisis?

Germany is singled out as the culprit for its singular focus on austerity measures to handle the debt crisis in the Eurozone. Many critics wonder whether Germany is turning the Eurozone into a German ordoliberal rule-based system.  I suggest that ordoliberalism is more precise to understand the German foci on austerity than neoliberalism which dominates the literature. Ordoliberalism starts from the assumption that a strict-rule based disciplinary system is required for markets to work efficiently.

I propose three steps in the paper. First I want to present the ideological clash of the German Ökonomen Streit between the ordoliberals and (neo)Keynesian economists within and outside of Germany starting with a public letter by Hans-Werner Sinn in July 2012. The hotly debated dispute is between German ordoliberals arguing that only fiscal prudency and a strict rule-based system can regain the trust of the markets and in contrast Keynesians who maintain that the single focus on austerity measures is self-defeating leading in the process to higher debts (and even less competitiveness). In the second step, I will focus on the German contradiction: just as Angela Merkel is endorsing “more Europe” since the end of 2011, the population as well as her own party (CDU/CSU) is turning against the bail-out programs of the ECB. While the international press (with some Schadenfreude) reports about the isolation of the Bundesbank president, Jens Weidmann, he is hailed within Germany as the true representative of the stability culture of the ECB. In the final section, I will address whether the band-aid solutions suggested at the EU level are sufficient to resolve the crisis, and in particular whether the recent growth argument advanced by French president, François Holland, and the technocratic transition prime minister of Italy, Mario Monti, is realistic to think that we can “grow” out of the crisis focusing mainly on increasing competitiveness. Or do we have to rethink the basic assumptions of capitalism and in particular the model of financialization which has existed since the 1970s and challenge the “imperial common sense” and neo-liberal capitalism (Stephen Gill 2012) to create alternatives and credible solutions to the normative and political frameworks of the Eurozone (as well as the world order).