A persistent theme — indeed the leitmotif — of the way that German
leaders discuss the eurozone is their insistence on the importance of
following the rules. That refrain is followed by a chorus from the rest
of the monetary union demanding to know why
Germany
is taking such an inflexible approach. The answer, it turns out,
reflects the way Germany’s federal system of government has shaped its
decision-making, as well as Germany’s historic experience with debt
crises.Germany’s obsession with rules long predates the current
eurozone crisis.
The country’s policymakers always insisted that Europe could not have a
common currency without first achieving economic convergence. But that
looked like it would never happen. So, in the 1990s, as the eurozone was
being established, Germany argued for rigorous enforcement of the
“convergence criteria,” the requirements necessary for adopting the
euro.
Economists in every other country ridiculed the Teutonic fixation on
firm rules. There is no reason, for example, why a debt-to-GDP ratio of
59 percent should be considered safe but 62 percent regarded as
irresponsibly dangerous. But the Germans insisted — and ultimately got
what they wanted. That approach stemmed in part from Germany’s political
structure. The more federal a country’s system of government is, the
more rules are needed to ensure its smooth functioning. When the
responsibilities of different levels of government are not clearly
delimited, there is the danger that officials will try to pass burdens
to higher levels. In order to avoid this, federations often adopt a
legalistic approach.
Indeed, there is a strong correlation, historically, between
successful federations and a stable monetary policy undergirded by clear
rules. In the late 20th century, Switzerland, Germany and the United
States — all federal countries — were pioneers in applying a
stability-oriented monetary policy. Given that the eurozone is in many
ways federal in its structure, a clear commitment to the rules seemed to
Germany to be a prerequisite for its success.
