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

26 Pages Posted: 4 Jun 2015

See all articles by Lars P. Feld

Lars P. Feld

Walter Eucken Institute

Ekkehard A. Koehler

Walter Eucken Institute; University of Freiburg - College of Economics and Behavioral Sciences

Daniel Nientiedt

New York University (NYU) - Department of Economics; Walter Eucken Institute

Date Written: May 30, 2015

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.

Keywords: ordoliberalism, Eurozone crisis, constitutional economics, monetary and fiscal policy

JEL Classification: B130, B260, B310, D780, E610, E630

Suggested Citation

Feld, Lars P. and Koehler, Ekkehard A. and Nientiedt, Daniel, Ordoliberalism, Pragmatism and the Eurozone Crisis: How the German Tradition Shaped Economic Policy in Europe (May 30, 2015). CESifo Working Paper Series No. 5368, Available at SSRN: https://ssrn.com/abstract=2613901

Lars P. Feld (Contact Author)

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-W├╝rttemberg D-79100
Germany

Ekkehard A. Koehler

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg, 79100
Germany

University of Freiburg - College of Economics and Behavioral Sciences ( email )

Freiburg, D-79085
Germany

Daniel Nientiedt

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

Walter Eucken Institute ( email )

Goethestrasse 10
Freiburg im Breisgau, Baden-W├╝rttemberg D-79100
Germany

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