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The Future of the Euro$
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Matthias Matthijs and Mark Blyth

Print publication date: 2015

Print ISBN-13: 9780190233235

Published to Oxford Scholarship Online: March 2015

DOI: 10.1093/acprof:oso/9780190233235.001.0001

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The Reluctant Leader

The Reluctant Leader

Germany’s Euro Experience and the Long Shadow of Reunification

(p.117) 6 The Reluctant Leader
The Future of the Euro

Schmidt Newman

Oxford University Press

This chapter examines Germany’s critical role in Europe’s regional architecture. The German government has pushed a euro crisis response motivated by a concern for the moral hazard generated by other member states. As such, Germany has played the role of reluctant leader—cautious and circumscribed—a strategy that was not without risk. While a number of academic and policy analyses have suggested that this halting response inflated the cost of the crisis by sowing the seeds of market doubt and contagion, it is important to understand why policy frames stressing either German exports or the risk of contagion were rejected in Berlin. This chapter stresses how the costs and timing of German reunification combined with the post-2005 economic recovery, relative to the timing of the euro crisis, set in motion a series of political economy dynamics that favored the use of the “moral hazard” frame over other possible crisis alternatives.

Keywords:   Germany, euro crisis, moral hazard, German exports, contagion, German reunification

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