Will Merkel’s coalition partner hold the line on the European Stability Mechanism?

The complete loss of economic common sense in the Eurozone, which we have seen over the past one and a half years, would be less depressing if it had been driven by politicians with an explicitly interventionist agenda. The events would at least have made some sense that way. But in fact, few countries in Europe are currently governed by parties which are openly hostile to the market economy per se. Yet the positioning of those who consider themselves market-friendly has been just as disappointing.

Perhaps the worst example is Germany’s Free Democratic Party (FDP), the junior partner in Angela Merkel’s ‘black-yellow’ coalition, and nominally a liberal party. When investors first became nervous over Greek bonds, the FDP took the line that to be liberal means to be unconditionally pro-European (by which they mean pro-EU). Without much visible internal discussion, the party has been complicit in a policy of bail-out packages which defies basic principles of market economics, and the rule of law itself. They have, to say the least, not excelled for their resistance towards the creation of a European transfer union, and they have been quick to denounce dissenters as right-wing populists, or worse: Eurosceptics.

So it is all the more laudable that dissenting voices within the party are now mobilising. A group of so-called ‘Euro-rebels’ within the FDP, surrounding the MP Frank Schäffler, has begun to prepare a ballot on the establishment of the European Stability Mechanism (ESM) among the party base. If the majority of FDP members reject the ESM in the ballot, then the decision is binding for the party, whether the leadership likes it or not. This could have far-reaching consequences. The black-yellow coalition would then have to renegotiate its position on the ESM. To force the leadership into holding the members’ ballot, the Euro rebels first need to collect about 3,300 signatures, which they are expected to find.

Schäffler, the initiator, has a troublemaker track-record which most readers of this blog will find to their liking. He did not join the choir when virtually all of his colleagues blamed the financial crisis on ‘excessive’ deregulation and runaway financial capitalism. Rather, Schäffler explained the events in terms of the Austrian School’s theory of the business cycle, and advocated a de-nationalisation of the money supply. He also pleaded for a framework enabling an orderly winding-up of insolvent banks, and later, of insolvent countries. Within the party, he leads a caucus called ‘Liberal Awakening’, which attempts to push the party towards a classically liberal line. A bewildered Süddeutsche Zeitung writes about him:

“For most of us, extreme economic liberalism […] is a horror. For this FDP-politician […], it is a personal utopia.”

Those of us who consider extreme economic statism the greater horror should wish the Euro rebels luck. They could make a much-needed difference.

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

1 thought on “Will Merkel’s coalition partner hold the line on the European Stability Mechanism?”

  1. Posted 21/09/2011 at 11:34 | Permalink

    It would rather surprise me to learn that the FDP leave the shackels of “being in a coalition government and hence, forced to surrender all liberal principles to the greater good” and become a rational functioning party devoted to arguments of free market. I doubt it. Frank Schaefflers attempt to bring rationality back to liberal politics will fail because it is completely outdated. German politics is ruled by affect and emotion, and – most of all – by ideology. It’s because of ideology that economic sense is sacrificed on the alter of European integration. Schaeffler is promoting something that comes close to an open market economy, a rather hard to swallow pill for Germans who like being supervised, restricted and guided by their state. Accordingly, I foresee that Schaeffler’s attempt is doomed to failure, because being left with a choice between self-responsibility and paternal state care, most Germans and most FDP-members will choose the latter. Anyway, what I find hard to explain is, where the heck Schaeffler could hide for so long, before being uncovered as the “extreme economic liberalist” he seems to be, I mean, a libertarian amongst socialists, surely he must have been uncovered decades ago…

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