Germany and the Euro—Domestic Discourse on Monetary Stability and its Political Implications—

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The European single currency euro was introduced in 1999, 10 years after the fall of the Berlin Wall. The German unification and the establishment of the European Union (EU) were one and indivisible. Both the events led to significant changes in German politics and economy. The development of the EU caused simultaneously the transformation of the domestic system. This article analyzes the interaction between the German domestic politics and the development of the European single currency, and at the same time the influence of the euro to the German domestic politics.<br>In the first section, German discussion on the introduction of the single currency and the characteristics of Germany's European diplomacy are examined. The historical development of the discourse of the currency has the decisive influence on the German policy discussions. And it is discussed that the system of the euro and the introduction of the Stability and Growth Pact (SGP) were strongly influenced by the German policy ideas. In the second section, the period after the introduction of the euro is discussed to analyze the institutional and policy changes in Germany after the introduction of the euro. The domestic economic reforms necessary to respond to the changed environment and the changes in the German political process is discussed. In the third section, political developments under the grand coalition (2005-2009) are discussed. The grand coalition was one of the answers to the social hardship caused partly by the euro and its budgetary discipline. Despite the financial crisis in 2008, Germany introduced a new constitutional fiscal discipline. The stable majority by the grand coalition and the discourse on budget consolidation made this reform possible.<br>The case of the euro and the SGP shows that the domestic politics and the European developments are inseparably interconnected. Germany tried to upload its discourse and the system of monetary stability to the European system. At the same time, the constraints set at the European level caused changes in the domestic system.


  • EU Studies in Japan

    EU Studies in Japan 2010(30), 66-88, 2010

    The European Union Studies Association-Japan


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