Informal Governance and the Eurozone Crisis

摘要

Europe's sovereign debt crisis has left no doubt that Germany has the ultimate authority in financial matters in the EU. However, between 2009 and 2012 Germany has been unable to safeguard its core objectives, which we define as follows: (1) stabilizing the eurozone; (2) limiting the taxpayers' financial guarantee exposure; and (3) keeping inflation low. This outcome is at odds with the expectation of the informal governance literature that the dominant country will always be able to protect its core interests after overriding the ordinary procedure. We argue that Germany's quandary can be explained by two interrelated factors. First, policymakers were subject to an incentive structure that encouraged crisis mitigation efforts, but not preparedness. This explains Germany's long hesitation before offering any assistance to its partners. Second, once financial guarantees were provided, political disagreements over the sequence of reform steps as well as instruments and conditionality of financial assistance programmes prolonged investor fears of a eurozone breakup, further compromising Germany's interests.