Ups and Downs on how Germany won the European Debt Crisis

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Abstract

The sovereign debt crisis that plagued the European Union seems like an old memory in the collective imagination. However it is not long time since the crisis affected the continent. Nevertheless it is possible to draw some conclusions: while Germany – the former “sick man of Europe” – is prospering, and others, like Italy, are beginning to recover, peripheral areas like Greece are still dealing with the repercussions of the crisis.

This paper investigates the role of Germany in the Euro debt crisis, analysing its position, its strategy and its gains and the European context in which the crisis took place. German willingness to support reforms of the EU in light of the recent elections will be taken in consideration as well. Moreover it is argued that said crisis finds its roots not only in the Greek disregard of the parameters of Maastricht – which it followed by forging its finances – but also in a suspected German use of beggar-thyneighbour policies during Maastricht’s implementation.

It will be noted that, however, albeit Germany is committed to survival of the Euro, Germany’s plan of imposing macro rules, austerity and rigour on more troubled Eurozone members is not the way for an healthy Euro area.

Conclusively some policy recommendations will be discussed in order to avoid a reiteration of the crisis.

 

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