Fiscal Capacity Building in the Eurzone: Germany Between the Hanseatic League Countries and France

German governments and European Union (EU) member states forming the Hanseatic League (HL) have had very similar preferences on regulating the exercise of the core state power of fiscal policy at the national level by means of EU-level rules, and on fiscal capacity building at the supranational level. We would expect German and HL governments to be close allies on these matters. However, empirically, we detect differences. German governments have repeatedly resisted joining the HL coalition on EU fiscal policy issues and accepted compromises with France. In order to explain this divergence we consider the relative explanatory merit of two main strands of theorizing: a constructivist focus on economic ideas — here ordoliberalism — and ‘embedded bilateralism’; and an intergovernmentalist / realist focus on geo-strategic interests — here, cooperative bilateralism and the survival of the Eurozone as currently configured. Our paper argues that applications of the two theoretical approaches can explain German preferences in allying with either the HL or France. We argue that German governments have performed a ‘skewed balancing act' between the HL and France, leaning slightly to the latter, thus opening a limited space for Eurozone-level capacity building. Whereas the norms of bilateral cooperation and geostrategic interests explain the patient efforts of German governments to build compromises with France, ordoliberal ideas and domestic political constraints explain the limits of German concessions to France and Southern European member states on fiscal capacity building at the European level.