In an op-ed for the NYT, Rohac says that if the euro is to survive, German policymakers have to play a much more assertive role in the governance of the eurozone.
Moreover, other eurozone countries need to learn to play along and abandon the mind-set of Germany as a quasi-colonial power. European countries need to learn to appreciate the value of fiscal responsibility and get serious about tackling their fiscal and structural problems.
Germany is the only nation that has the political capital to urge Europe to put in place such governance mechanisms. With its economic weight, Berlin is uniquely placed to assume a stronger leadership position in reshaping the governance of the eurozone.
To succeed, Germans need to revive the “ordoliberal” ideas that drove the post-war economic miracle of their country. German ordoliberals — exemplified by figures such as Wilhelm Röpke and Walter Eucken — pioneered balanced budgets, independent monetary policy and competitive markets. All three are under attack in the present-day euro zone.
For the sake of saving the euro, Germans need to regain control of the European Central Bank. With Mario Draghi’s bond-buying scheme, the ECB has become a simple instrument of monetising the debt of individual member countries. Instead of bailing out countries through the back door, the ECB needs to return to its monetarist roots, and stabilise nominal spending in the eurozone. This may mean more aggressive monetary policy than what has been pursued to date, but it also means erecting a firewall between the ECB and the temptation to serve the immediate liquidity needs of individual eurozone governments.
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