A banking union of ideas? The impact of ordoliberalism and the vicious circle on the EU banking union

David Schäfer

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The establishment of the EU banking union reveals two major shortcomings of liberal intergovernmentalism. First, it fails to explain the preference formation of the most important actor – the German government. The banking sector was divided between public and private banks, and there is no clear-cut pattern about whose interests the German government promoted. Second, material bargaining power cannot account for German concessions despite favourable power asymmetries. This article seeks to demonstrate how an ideational frame can convincingly fill these gaps. Ordoliberal ideas were constitutive for German preferences. The manipulative use of ideas as strategic resources by the German government’s opponents explains why it made significant concessions. Germany’s government publicly acknowledged that breaking the ‘vicious circle’ between banks and sovereigns was the main objective of the banking union. This became a rhetorical trap used by a coalition of Southern European member states to force the German government to make concessions.

Keywords: banking union; ordoliberalism; economic and monetary union; euro zone crisis; vicious circle between banks and sovereigns (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2016-01-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Common Market Studies, 5, January, 2016, 54(4), pp. 961-980. ISSN: 0021-9886

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