Economic ideas, party politics, or material interests? Explaining Germany’s support for the EU corona recovery plan

ABSTRACT

Why did the German government champion a debt-financed and grants-based EU corona recovery plan, despite the country’s traditional aversion towards greater fiscal risk-sharing in Europe? To elucidate this question, this article critically assesses different explanatory factors cited in the academic literature and public debate to determine a country’s response to pressing challenges. Tracing Germany’s approach to the corona pandemic within the EU context, it finds that national material interests rather than (new) economic ideas or party politics were decisive. The timing, scope, as well as the limits of the German-inspired recovery plan for the fight against the corona crisis suggests at least as much continuity as change in Germany’s position on EU fiscal policy. Yet, the findings also highlight Germany’s enduring, and in fact reinforced, commitment to European integration and its preparedness to provide stability in moments of deep crisis for the EU.

KEYWORDS:

• corona
• crisis
• EU
• Germany
• material interests
• recovery plan

Acknowledgements

Earlier versions of this article have been presented at the (Virtual) European Union Seminar at the University of Salzburg, the 10th (Virtual) Conference of the ECPR Standing Group on European Union, and the 11th (Virtual) Annual Meeting of the European Political Science Association. For their helpful comments and suggestions on earlier drafts, I would like to thank Alex Afonso, Michael Blauberger, Björn Bremer, Adrienne Héritier, Martin Höpner, Ulrich Krotz, and Maurits Meijers; the two editors, Jeremy Richardson and Berthold Rittberger; and two anonymous reviewers. For editorial support, I would like to thank Fergal Treanor.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 ‘Mass publics’ mattered little for the topic of interest, presumably because public opinion on an EU corona fiscal instrument and the German part in it was not yet well established in the early stages of the pandemic. Similarly, there is no reason to ex ante assume a decisive role played by a particular German domestic institution like its Central Bank or Constitutional Court. Thus, public opinion and domestic institutions are referred to occasionally throughout the article but are not examined systematically.

2 The Online Appendix systematically contrasts the expected evidence following from the propositions with the evidence actually found.

3 The official documents and speeches were derived from the websites of the Commission, European Council, Chancellery, and finance ministry, looking for entries on important dates of the crisis and using the search word ‘corona’. The newspapers consulted comprise two German ones (Frankfurter Allgemeine Zeitung, Süddeutsche Zeitung), two French ones (Le Figaro, Le Monde), and three internationals (Euractiv, Financial Times, Politico). To find relevant reports, the search words ‘Germany’, ‘EU’, and ‘corona’ were used.

4 Germany early on made use of its large financial resources. In May 2020, the Commission stated that Germany alone accounted for more than half of the approved emergency coronavirus state aid.

5 In its Spring Economic Forecast in May, the Commission would confirm the unprecedented downturn of the EU economy contracting by 7.5 per cent in 2020, a revision down by nine percentage points compared to the Autumn Forecast of the previous year.

6 As a pandemic triggering global shutdowns and decline in demand, German industry could not compensate for their European losses through sales to export markets abroad. This marked an important difference to previous economic crises in Europe.

7 Noticeably, only a few weeks earlier in February, negotiations on the next MFF had failed because Northern member states including Germany had called for a reduced EU budget.

8 Thus, ideational factors in relation to the pandemic – namely perception and framing – mattered for the government’s approach. In this respect, the primarily exogenously driven concerns about German material interests were reinforced by endogenous considerations about the nature of the crisis and its implications for common European action. However, these ideational factors are different from and unrelated to the (wrongly) claimed change in German economic ideas.

9 National leaders approved both the recovery plan and the MFF at a European Council meeting in mid-July.

10 In this context, the evidence also suggests dismissing the interpretation that the German Constitutional Court’s ruling from 5 May 2020 challenging the legality of the European Central Bank’s monetary policy during the Eurozone crisis and thus implicitly also questioning its measures during the corona crisis, led the federal government to pursue a more active EU fiscal policy (cf. Financial Times, 5 May 2020). Rather, the sequencing of events and the interviewees’ explanations suggest that the Court’s ruling and the government’s corona crisis approach were two different issues – and politically dealt as such – and that German plans for comprehensive EU fiscal measures had already been far advanced at the time (Interviews 10, 12).

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Lucas Schramm

Lucas Schramm is a PhD Researcher at the Department of Political and Social Sciences at the European University Institute in Fiesole, Italy.