German Hegemony in the Eurozone and the European Union: Myth, Lasting or Lost?

Since the onset of the eurozone crisis more than a decade ago, Germany moved centre-stage as the 'reluctant hegemon' (Paterson 2011) who used its semi-hegemonic position to determine the reform of the eurozone governance architecture. In this context it has been argued that Germany would lack the resources to act as a true hegemon while simultaneously pursuing its economic self-interest more effectively than other EU members (Kundnani 2019). In policy terms, it can be argued that Germany pursuing supranational public policy on its own is usually doomed to fail. This is even more likely since Germany is regarded as weakened in economic and political terms by quite a number of observers with likely repercussions (Artus 2019). Leadership via the EU-framework (Janning&Möller 2016) will inevitably have to be combined with more ‘integration by differentiation’ (Gujer 2018) and addressing Germany’s current account surpluses which are usually regarded as excessive at least outside of Germany (Dieter 2018) and partly also within the Federal Republic (e.g. Truger 2019). This paper compares contrasting theoretical approaches on Germany’s alleged hegemony – or ‘central power’ role (Streeck 2022) - and considers the potential of the new Germany three party ‘traffic-light’ coalition government between the SPD, the Greens and the FDP in creating a new macroeconomic policy consensus domestically and subsequently also in the eurozone and in the wider Single Market. In this context the paper analyses both the current debate on redesigning EU fiscal rules after the current crisis and the controversies regarding the normalisation of monetary policy against the backdrop of potentially lasting inflationary pressure due to bottlenecks which were predominantly initiated by the economic shocks caused by the Covid pandemic. The core question is if Germany in the post-Merkel era can achieve a credible fiscal framework for the eurozone to assign appropriate responsibilities which takes account of the current macroeconomic context and alternative monetary policies. This has to be done against the background of political volatility amongst Germany’s partners in the EU - most significantly in Italy and France- and of a risky period of stagflation in a number of EU countries, including Germany itself, which has important implications for both financial policy and wage policies.