Rule, Germania

PRINCETON – A persistent theme – indeed the leitmotif – of the way that German leaders discuss the eurozone is their insistence on the importance of following the rules. That refrain is followed by a chorus from the rest of the monetary union demanding to know why Germany is taking such an inflexible approach. The answer, it turns out, reflects the way Germany’s federal system of government has shaped its decision-making, as well as Germany’s historic experience with debt crises.

Germany’s obsession with rules long predates the current eurozone crisis. The country’s policymakers always insisted that Europe could not have a common currency without first achieving economic convergence. But that looked like it would never happen. So, in the 1990s, as the eurozone was being established, Germany argued for rigorous enforcement of the “convergence criteria,” the requirements necessary for adopting the euro.

Economists in every other country ridiculed the Teutonic fixation on firm rules. There is no reason, for example, why a debt-to-GDP ratio of 59% should be considered safe, but 62% regarded as irresponsibly dangerous. But the Germans insisted – and ultimately got what they wanted.

That approach stemmed in part from Germany’s political structure. The more federal a country’s system of government is, the more rules are needed to ensure its smooth functioning. When the responsibilities of different levels of government are not clearly delimited, there is the danger that officials will try to pass burdens to higher levels. In order to avoid this, federations often adopt a legalistic approach.