ABSTRACT
The present financial and economic crisis has split the Eurozone not only along
geographical lines among northern current account surplus and southern deficit countries,
the fissure also reflects a deep ideological rift in how to resolve the financial and sovereign
debt crisis in the Eurozone. Under the leadership of Germany, the current account surplus
countries of Finland, Austria, and the Netherlands call for strict austerity rules to reign in
fiscal deficits in the highly indebted Eurozone states (the so-called GIPSI countries of
Greece, Ireland, Portugal, Spain, and Italy). The pressure for strict fiscal consolidation has
only limited support among other European nations. In fact, many European government
and political leaders have criticized Germany for its single-handed pursuit of austerity
measures, its strict legal approach to the ECB mandate of monetary stability, and its export
model which has contributed to the macroeconomic asymmetries in the Eurozone. Blyth
(2013) has called austerity and the underlying ideational foundation of ordoliberalism as
‘The History of a Dangerous Idea’, since the policy of fiscal contraction has not promoted
growth. Rather, the opposite has occurred. According to De Grauwe and Ji, the asymmetric
fiscal adjustment between the debtor and creditor countries has produced a strong
negative relation, i.e., ‘the stronger the austerity programme, the deeper the decline in
GDP’ (2013, 3). This in turn is disputed by Wolfgang Scha
¨
uble, the German Finance
Minister, who saw in the miniscule growth rate of some peripheral countries in Q3 2013 a
silver lining. He declared in the Financial Times that ‘Europe is being fixed’ and one should
‘ignore the doom-mongers’ (Scha
¨
uble 2013, 9).
