The aim of this paper is to analyse the reaction of Germany to the sovereign debt crisis and its policy stance using Rational Choice as an explanatory device. It is suggested, that a very rational approach is employed both by the government and the public. However, with the incisive need to support Greece to prevent an outspread of the crisis, the German government lost public support albeit acting rational in its national interest. This paper claims, that missing and wrong communication by the government caused a discrepancy that alienated the public from the national interpretation of the issue. The paper concludes with a recommendation on how the German government should deal with the Euro crisis domestically to tackle the pressing issue effectively.
Building upon Axelrod’s theory on interstate cooperation, there will be little difficulty to explain Germany’s approach to solve the crisis. When it became obvious, however, that Greece would need support or otherwise the crisis could likely spread across Europe, the German government found it hard to raise support for this unpopular policy. Looking into theory, Putnam may offer a good insight why German politics hold a stern position when it comes to financial support, which can be said to follow rational choice. This is true, even after it was more then apparent on a national level that support was necessary and indeed beneficial to German interest. Trying to connect Axelrod’s ideas with those of Putnam, it is likely that public opinion within Germany deprives the government of much needed leeway.
It is highly suggested that German domestic constraints on state sponsored aid for Greece heavily influence German politics, inhibiting decisive rational choices on the national level. Looking closer on the second level, it appears that the German public also derives its stance from a mostly rational interpretation of the sovereign debt crisis, giving not much heed to the European cause or symbolic traditions, but now inhibits rational decisions on the national level. As the public is susceptible to a rational approach to the issue, this discrepancy results from a communication problem.
Table of Contents
1. Introduction
2. Rational Choice Theory
I. The Rational Choice Approach
1. Decision under Certainty
2. Decision under Uncertainty
3. Decision under Risk
II. Cooperation
1. Two-Person Cooperation
2. The Missing Piece – Repeat Play
3. External Enforcement
4. Interstate Cooperation – Principles and Facilitators
a. Mutuality of Interest
b. Shadow of the Future
c. Number of Players
III. The Domestic and the International Level
IV. Rational Choice and the Public
V. Groups, Cooperation, and the Problem of Free Riders
VI. A Short Subsumption – Areas of Conflict
3. The Sovereign Debt Crisis – A Case-Related Summary
I. Build-up in Greece
II. German Response
4. A Theory-Based Case Analysis
I. Level I – The International Level
1. Mutuality of Interest
2. Shadow of the Future
3. Monitoring and Punishment
II. Level II – Public Opinion
1. Opposition to Financial Support and its Origin
2. What Constitutes Public Opinion on the Crisis?
3. Germany and its Rational Approach to European Politics
4. An Adaptive Public and Wrong Communications – Reasons for Discrepancy
5. Conclusion
Objectives and Core Themes
This paper aims to analyze Germany's political reaction to the 2009 sovereign debt crisis by utilizing Rational Choice theory as an explanatory framework, specifically examining how domestic constraints influenced governmental decision-making.
- Application of Rational Choice theory to international relations and cooperation.
- Interaction between domestic public opinion and international political negotiation (two-level games).
- The role of communication and rationalization in shaping public perception of the Eurozone crisis.
- The impact of institutional frameworks and treaties on political decision-making in the EU.
- Analysis of the "free-rider" problem and individual incentives in large-group political behavior.
Excerpt from the Book
1. Introduction
Ever since the Financial Crisis 2007 and the following sovereign debt crisis in 2009, there has been an on-going debate about how it is possible to uphold the Monetary Union. It seems the fiscal union has lead to unanticipated political and economic interdependencies between member countries. These lead to an imbalance in the distribution of responsibilities, leading to an increase of polarizing attitudes towards further economical and political relations:
While Greece is blaming better situated, export-driven central European countries for their miserable economic situation and demands financial support, donor countries such as Germany have quite a different debate going on. The question if indebted countries should receive financial support after and how it is feasible to prevent further crises causes much controversy in politics as well as in public debate.
Especially Germany, a pivotal actor in the European monetary union and representing one of the leading donor nations, finds itself especially in an ambiguous situation. Although Germany historically supports the European cause fervently, now – after a decade of heavy reforms, severe austerity, and economic stagnation – there is great reluctance among the public to bear the consequences of – as perceived – others’ self-inflicted debt and mismanagement. In this respect, BBC News captioned in regards to the Cyprus bailout in 2013 that – confronted with hostile demonstrations in the receptor country – the German public feels aggrieved, as they “perceive their country as a generous donor of hard-earned cash to peoples who have let their finances go to ruin.”
Summary of Chapters
1. Introduction: Outlines the research focus on Germany's reaction to the sovereign debt crisis and the analytical use of Rational Choice theory.
2. Rational Choice Theory: Establishes the theoretical foundation, covering instrumental rationality, cooperation dilemmas, and group behavior models.
3. The Sovereign Debt Crisis – A Case-Related Summary: Provides a historical overview of the Greek fiscal situation and the initial German government response.
4. A Theory-Based Case Analysis: Applies the theoretical frameworks to the international level of negotiations and the domestic constraints imposed by German public opinion.
5. Conclusion: Synthesizes the findings and provides recommendations for improving communication between the government and the public regarding Eurozone policy.
Keywords
Rational Choice, Sovereign Debt Crisis, Germany, European Monetary Union, Cooperation, Public Opinion, Two-Level Games, Moral Hazard, Free Rider, Austerity, Communication, Policy, Political Constraint, Institutionalism, Eurozone
Frequently Asked Questions
What is the core focus of this research?
The research examines how individual rationality and domestic political constraints in Germany influenced the country's decision-making process regarding financial support for Greece during the sovereign debt crisis.
Which central theoretical frameworks are utilized?
The analysis primarily uses Rational Choice theory, specifically Robert Axelrod’s cooperation theory, Robert Putnam’s two-level game approach, and Mancur Olson’s logic of collective action.
What is the primary research question?
The paper asks how German domestic constraints, stemming from the public's rational interpretation of the crisis, inhibited the government's ability to provide timely financial support and how this discrepancy resulted from a communication failure.
Which scientific method is employed?
The work employs a theory-based case study method, interpreting empirical events (the German response to the Greek crisis) through the lens of established political science theories.
What is the main argument regarding the German public?
The author argues that the German public's opposition to bailouts was a rational response to perceived rule-breaking, which was exacerbated by the government's failure to communicate the necessity of the aid effectively.
Which keywords best describe this study?
The most important keywords include Rational Choice, Sovereign Debt Crisis, Germany, Two-Level Games, and Public Opinion.
How does Axelrod’s theory explain the initial German refusal of aid?
Under the framework of cooperation, Germany viewed rule-breaking by Greece as a defection that required punishment to prevent "moral hazard" and to maintain the integrity of the European monetary regime.
What role does the "two-level game" play in this analysis?
It explains the inter-linkage where the German government must reconcile international pressures (saving the Euro) with domestic constraints (voters' resistance to "paying for" others' debt).
- Quote paper
- Tobias Rentschler (Author), 2013, How Individual Rationality can cause Political Constraint that inhibit Financial Support, Munich, GRIN Verlag, https://www.grin.com/document/960797
