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The notion of a broad green backlash is set to dominate this year's European election campaign. Based on new survey data from more than 15.000 respondents in Germany, France and Poland, we show that it is largely overblown. A majority of voters still wish for a more ambitious climate policy and would support a raft of concrete measures to bring down emissions. However, supporting pivotal voters in the middle will require a stronger focus on green investment and industrial policy and offsetting measures for effective but unpopular policies like carbon pricing. Parties should not waste the coming months outbidding each other over how to cater to imagined climate fatigue but compete over concrete recipes to green the economy.
The Net Zero Industry Act (NZIA) was touted as the EU‘s big response to the US Inflation Reduction Act. After a year of negotiations, it will finally hit the legislative books. In his policy position, Nils Redeker analyses what has become of the EU‘s green industrial policy ambitions, what the NZIA teaches us about Europe‘s role in the clean tech race, and what the next Commission needs to do to formulate a constructive answer to the global return of industrial policy.
Germany Needs a Europe Pact
(2023)
German Chancellor Olaf Scholz recently presented a new “Germany-Pact” to advance the country, following media reporting that has portrayed Germany as the “sick man of Europe” due to its waning economy. However, as Johannes Lindner and Nils Redeker observe, Europe does not play a big role in this pact. In this op-ed, originally published in Handelsblatt, they explain why Germany should refocus on the EU single market and develop an overall strategy for modernising the country and Europe.
The US Inflation Reduction Act (IRA) has rekindled European fears of missing out in the global green technology race. However, EU member states still disagree on whether the greater risk lies in doing too much or too little. At heart, there remains significant confusion on which European sectors stand to lose competitiveness; how much the EU should fret about these losses; and whether there is a need for joint support from the EU level to avoid economic divergence. We take a first stab at the existing sectoral evidence. Our results suggest that the IRA will undercut European production costs in several sectors. This does not mean the EU must mimic the US program. However, it does mean that the EU needs to turn its piecemeal Green Deal Industrial Plan into a coherent strategy. This requires a greater focus on green industries in which Europe can develop a competitive edge and more joint financing at the EU level.
"It’s the politics, stupid” - don't squander this golden opportunity for reforming the fiscal rules
(2023)
On the reform of fiscal rules, the EU risks letting a once-in-a-decade opportunity slip. The time window for a successful reform is tight. And the Commission's current proposal is economically sound but politically overconfident. This risks drawing the Commission into political fights it cannot win, and would repeat some of the mistakes of the last reform process. At the same, current rules remain impossible to apply. Those who romanticize the old framework therefore need to realize that a retreat to the old system is not an option. The EU thus needs a compromise and needs it fast. To get there in the little time left, we propose four improvements: first, the system needs some numerical benchmarks for debt reduction in the adjustment period; second, it should include a clear definition of the scope of possible deviations through growth-oriented reforms and investments; third it should come with explicit carve-outs for national expenditures linked to some EU programs; and fourth, it needs credible enforcement through better ownership not only at the national but also at the European level.
Why was the Eurozone crisis so difficult to resolve? Why was it resolved in a manner in which some countries bore a much larger share of the pain than other countries? Why did no country leave the Eurozone rather than implement unprecedented austerity? Who supported and opposed the different policy options in the crisis domestically, and how did the distributive struggles among these groups shape crisis politics?
Building on macro-level statistical data, original survey data from interest groups, and qualitative comparative case studies, this book argues and shows that the answers to these questions revolve around distributive struggles about how the costs of the Eurozone crisis should be divided among countries, and within countries, among different socioeconomic groups. Together with divergent but strongly held ideas about the 'right way' to conduct economic policy and asymmetries in the distribution of power among actors, severe distributive concerns of important actors lie at the root of the difficulties of resolving the Eurozone crisis as well as the difficulties to substantially reform EMU. The book provides new insights into the politics of the Eurozone crisis by emphasizing three perspectives that have received scant attention in existing research: a comparative perspective on the Eurozone crisis by systematically comparing it to previous financial crises, an analysis of the whole range of policy options, including the ones not chosen, and a unified framework that examines crisis politics not just in deficit-debtor, but also in surplus-creditor countries.
Germany’s large current account surplus has been widely criticized, especially against the backdrop of the role of macroeconomic imbalances in the Eurozone crisis. We argue that Germany’s resistance to reduce its massive current account surplus through an expansionary policy at home is rooted in distributive struggles about the design of possible adjustment policies. To explore this argument, we leverage original survey data from 135 German economic interest groups, qualitative interviews with interest group representatives and policymakers, and data from public opinion surveys. We show that while there is general support for internal adjustment among German interest groups, they disagree heavily about which specific policies should be implemented to achieve this goal. Together with a broad public and elite-based consensus to avoid a break-up of the Eurozone, this polarization turns financing into a politically attractive strategy. Rather than being rooted only in German ordoliberal ideas or Germany’s export-oriented structure, distributive conflicts contribute significantly to Germany’s resistance to reduce its large current-account surplus. Because similar dynamics can be observed in other surplus countries, we argue that distributive struggles within surplus countries played an important role in interstate conflicts about the management of the crisis.
The Politics of Stashing Wealth: The Decline of Labor Power and the Global Rise in Corporate Savings
(2021)
This article investigates the political roots of the global rise in corporate savings. In recent years, firms throughout advanced economies have started to accumulate enormous savings. Instead of using their revenues to reinvest or raise wages, many companies now stash their profits within financial markets, contributing to sluggish growth, financial fragilities, and rising inequality. I argue that political institutions that determine the balance of power between firms and employees play an important role in shaping this trend. The stronger unions are, the more they pressure firms into using revenues for pay increases and investment. The more unions’ influence erodes, the stronger the rise of savings. Using panel data from 25 Organization for Economic Cooperation and Development countries as well as a regression discontinuity design leveraging the German law on codetermination, I find robust and causal evidence supporting this claim. These results have implications for our broader understanding of how political institutions affect financial imbalances and economic inequality.
Misremembering Weimar: Hyperinflation, the Great Depression, and German collective economic memory
(2021)
The well-known German aversion to inflation has attracted a lot of interest and is often attributed to a specific historical memory: Weimar. Yet we do not know much about why hyperinflation seems to overshadow the Great Depression in German collective economic memory. To answer this question, we study what exactly it is that Germans believe to remember about their past. Using original survey data, we show that many Germans do not distinguish between hyperinflation and the Great Depression, but see them as two dimensions of the same crisis. They conflate Weimar economic history into one big crisis, encompassing both rapidly rising prices and mass unemployment. Additionally, more educated and politically interested Germans are more likely to commit this fallacy. Our finding thus nuances ideational explanations for Germany's economic policy stance in the European Union.