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Ordoliberalism, Pragmatism and the Eurozone Crisis: How the German Tradition Shaped Economic Policy in Europe

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  • Lars P. Feld
  • Ekkehard A. Köhler
  • Daniel Nientiedt

Abstract

German policy during the Eurozone crisis supposedly follows an ordoliberal tradition. In this paper, we discuss to what extent this contention holds and to what extent Germany pragmatically responded to different crisis phenomena. A proper analysis of ordoliberal thinking reveals that the European Monetary Union can be justified on ordoliberal grounds as an economic constitution for Europe in which several pillars supposedly aim at ensuring sound money in the Eurozone. The policies the German government pushed during the Eurozone crisis have been informed by the ordoliberal tradition. In particular, this tradition may explain why the German government has been hesitant to support the call for Eurobonds and has only reluctantly established the European Stability Mechanism (ESM). However, the decisions on the ESM and the acceptance of unconventional monetary policy in Europe show that German economic policy largely responded pragmatically to the challenges offered by the crisis.

Suggested Citation

  • Lars P. Feld & Ekkehard A. Köhler & Daniel Nientiedt, 2015. "Ordoliberalism, Pragmatism and the Eurozone Crisis: How the German Tradition Shaped Economic Policy in Europe," CESifo Working Paper Series 5368, CESifo.
    • Handle: RePEc:ces:ceswps:_5368
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    More about this item

    Keywords

    ordoliberalism; Eurozone crisis; constitutional economics; monetary and fiscal policy;
    All these keywords.

    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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