ABSTRACT
According to a Financial Times background series on the crisis, there was indeed no questioning of defending and consolidating the euro, but support for Greek membership did not remain rock solid behind the scenes (Spiegel 2014). Reportedly, at the height of the crisis, Scha¨uble headed the ‘infected leg camp’ of policy-makers and advisers arguing that the exit of Greece from the EA was necessary to save and strengthen the euro. By contrast, the ‘domino camp’ feared that ‘Grexit’ would result in market panic and contagion including Spain and Italy and lead to the unravelling of the EA. In a situation rife with uncertainty, Merkel ultimately decided against taking the risk of Grexit. This debate shows that the preferences of Germany, a core actor, on Grexit, a core policy question during the crisis, were not unitary, fixed or internalized but resulted from calculations of negative interdependence and risk in a situation of high uncertainty. Whereas the EA countries (ultimately) agreed on the supreme goal of preser-
ving the euro and the EA, they held strongly conflicting reviews on the means to achieve this goal. Germany, together with Austria, Finland and the Netherlands, sought to minimize their liabilities and financial assistance. What unites these countries is their high solvency and credit rating, which made them independent of external assistance. In early 2010, Germany was the most reluctant EA country to commit itself to the Greek bailout. The governments of Austria, Finland and the Netherlands sympathized with the German position, however.14 The German government favoured bringing in assistance from the International Monetary Fund (IMF),15 rejected Eurobonds and capitalraising by the European Commission, called for a strengthening of the Stability and Growth Pact (SGP), including automatic sanctions, the withdrawal of
voting rights, an orderly sovereign default procedure and a procedure to exclude countries in breach of the rules.16 Later in the crisis, Germany opposed the expansion of the European Financial Stability Facility (EFSF), the direct recapitalization of banks through the rescue funds, and a supranational resolution fund for European banks. By contrast, France urged the EU early on to take active measures against the
Greek credit crunch and to rein in financial markets. Together with Belgium, Greece, Italy, Portugal and Spain, it pushed for the ‘Europeanization’ of sovereign debt and for soft adjustment policies but opposed harsh sanctions for high deficit countries. These countries were in a worse economic and fiscal position than the first group: less wealthy,more highly indebted, and under pressure from the financialmarket. Itwas therefore in their self-interest to get access to additional liquidity with minor strings attached. For this reason, the southern EA countries led by France demanded, among others, the establishment and expansion of rescue funds, unlimited bond purchases by the European Central Bank (ECB), a bank licence for the EFSF and ESM, the direct European recapitalization of banks, a European bank resolution fund and the introduction of Eurobonds – but opposed rigid austerity conditions and automatic sanctions (Schild 2013). In general, LI offers a plausible explanation of state preferences in the EA
crisis. All EA countries were in favour of deepening economic integration to manage the high actual and potential negative interdependence created by the debt crisis. They differed starkly regarding the preferred terms of integration, however, and this difference was in line with their fiscal positions. France, however, fits the pattern only partly.17 At the outset of the crisis, France was certainly the most fiscally and economically stable country of the ‘southern coalition’. It enjoyed triple-A credit ratings and bond yields that were only marginally higher than Germany. Yet, French bonds already suffered from relative weak fiscal fundamentals and contagion effects of the Greek crisis in the spring of 2010 (De Santis 2012); French preferences might therefore have resulted from incipient and anticipated vulnerability. The stark difference to German preferences, however, is difficult to explain by material conditions only, but points to the relevance of ordoliberal vs Keynesian economic ideas (Hall 2012: 367; Olender 2012; Schild 2013). The intergovernmental preference constellation developed early in the crisis
and has remained stable across changes in government and issues. In France, the shift from Sarkozy to Hollande was characterized by a general continuity of crisis policy – in spite of Hollande’s support for Eurobonds and criticism of the Fiscal Compact (Schild 2013). Moreover, all issues, from the first bailouts via the establishment of the rescue funds and the reforms of budget monitoring policies to the development of banking union, were structured by the same coalitions and the same basic conflict between fiscally healthy countries advocating limited financial commitment together with strict fiscal and financial supervision on the one hand, and fiscally pressurized countries advocating strong European financial commitment in combination with looser fiscal and financial regulation, on the other.
