Thursday, April 14, 2016
Assembly E (DoubleTree by Hilton Philadelphia Center City)
The management of the Eurozone sovereign debt crisis has been characterized by the imposition of the costs of adjustment in an asymmetric manner on debtor countries, not on banks from creditor countries. From the perspective of preference-based explanations, this outcome reflects the international asset position of countries in the Eurozone – most notably whether they creditor or debtor countries.
In this paper, we move beyond this dichotomy by highlighting the importance of the role of ideas in the management of the Eurozone crisis. First, preference-based explanations are ill suited to capture important differences in the positions of France and Germany -- the two largest creditor countries – beyond their agreement on the protection of domestic banks from their exposure to GIPPS countries. Based on the notion of ‘gouvernance economique’, French policy-makers sought to introduce a Eurobonds mechanism scheme and to involve the European Central Bank as its guarantor. In contrast, German policy-makers, using Ordoliberalism as their frame, interpreted the cause of the financial crisis as the failure of countries to abide by rules and the inability of Keynesian economic stimulus to compensate for rule-based structural reforms. Second, we argue that lack of influence of the French idea of ‘gouvernance economique’ lies in its original aim, that is to achieve at the European level what French policy-makers could no longer achieved domestically. Thus, French policy-makers sought to shape the governance of the Eurozone but refused the binding nature of policies that would be involved in the transfer of sovereignty.
