When Growth Coalitions Fracture: Domestic Contestation and Preferences for EU Capital Market Integration

This paper examines how domestic growth coalitions shape national preferences toward European economic and capital market integration, contributing to debates in comparative political economy and EU studies on the domestic sources of integration outcomes. Focusing on Germany as a paradigmatic export-led economy, it analyses how institutionalised coalitional arrangements linking producer groups, industrial capital, bank-based finance, organised labour, and political elites mediate responses to structural economic change at both the national and European levels. Drawing on process tracing of key political decisions taken under the traffic-light coalition (SPD-FDP-Greens), complemented by elite interviews with representatives of core economic institutions, the paper identifies an ongoing shift within Germany’s growth coalition. For the first time in decades, the coalition has entered a phase of open internal contestation over the sustainability of export dependence and appropriate adjustment strategies. Our preliminary findings show that while some actors display openness to change and support increased domestic investment and fiscal expansion, others continue to prioritize reliance on the external demand and resist deeper EU capital-market integration. The paper advances existing scholarship by demonstrating that crisis-induced fragmentation within growth coalitions can coexist with continuity in preferences toward European integration. Through shadow case studies of other export-oriented economies in the EU’s high-quality manufacturing cluster (Netherlands, Belgium and Austria) and an FDI-dependent growth model (Poland), used as contextual benchmarks, the analysis highlights a distinctive pattern in Germany: internal coalition conflict has intensified without producing a corresponding shift in EU-level institutional integration, particularly in capital markets integration. The findings underscore the enduring constraining power of domestic political–economic coalitions in shaping integration trajectories, even under conditions of prolonged recession and structural crisis.