We’d Rather Pay Than Change. Explaining German Resistance to Macroeconomic Adjustment in the Eurozone Crisis

Germany’s role in the Eurozone crisis has been widely criticized. Although the union’s biggest country supported costly bailouts, it fiercely opposed all calls to adjust its economic policies in order to reduce its massive current account surplus. We argue that this resistance is not predominantly rooted in economic ideology, or Germany’s export-oriented economic structure, but in the distributive struggles about the design of possible adjustment policies. Although there is general support for strengthening domestic demand, different interest groups disagree about the desirability of specific policies that could be implemented to achieve this goal. Together with a broad consensus to avoid a break-up of the Eurozone, this polarization on the specificities of internal adjustment has made interstate financing the politically most attractive strategy. We examine this argument using original survey data from 135 important German economic interest groups and find empirical support for our theory. We also show that similar dynamics can be observed in Austria and the Netherlands. We argue that this homogeneity in preferences has facilitated coalition building amongst surplus states and allowed them to shape the management of the crisis.