Bad Ideas That Make Money: The Euro from Maastricht to the Fiscal Compact and Beyond

Why and how do bad ideas persist? While it has already been well established that ideas were crucial during the euro’s foundational period (McNamara 1998, Parsons 2003), what is less often appreciated is how the fiscal consensus governing the euro vacillated between rules and discretion during the 1990s and 2000s, and how the same ideas that caused the euro crisis in 2010 (austerity and structural reform) were also used to remedy it. Since the euro’s collapse has been averted, and Greece (for now) remains a member of the Eurozone, proponents of the orthodox approach have hailed Europe’s remarkable resilience in the face of a truly existential crisis, even though the result is an unhappy, deflationary, and low-growth equilibrium. In this paper, we trace the resilience of the ordoliberal and neoliberal ideas through the crisis, even in the face of an astounding amount of evidence that the professed cure was slowly killing the patient. We argue that Europe’s medium-term resilience is mainly due to the actions of the ECB, which operates in clear opposition to the Eurozone’s ordoliberal consensus. In the long term, the Eurozone’s resilience is but a chimera given the fact that the solution to the crisis could only be achieved by supranational technocratic demands superseding any legitimate national democratic choice. The euro as a political project will remain fragile at best as long as its underlying ideas continue to persist.