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State Indebtedness: The Beloved Enemy

by Patrick Schreiner Friday, Oct. 02, 2015 at 6:07 AM

"The slow one now will later be fast as the present now will later be fast." The state unlike the Swabian housewife can become indebted to invest in a more social and more human future. All personal and corporate profit depends on state investment in roads, schools, food safety etc.


By Patrick Schreiner

[This book review of Ingo Stutzle’s “Austerity as a Political Project: From Europe’s Monetary Integration to the Euro Crisis” (2013) is translated from the German on the Internet,]

Ingo Stutzle shows how the neoliberal dogma of “balanced state budgets” was – and still is – utilized and politically enforced in Europe. State indebtedness is emphasized first of all when the economic- and financial crisis in Europe is discussed in politics, science and media. The crisis is regarded simply as a “state debt crisis.” Debt conditions particularly of the crisis states in southern Europe are analyzed, their reduction in failed “adjustment programs” or “memoranda” defined as a goal and state spending cut more and more. This way of dealing with the Euro crisis did not happen by chance as Ingo Stutzle shows. Rather the neoliberal dogma of the “balanced state budget” was successfully implemented in the European integration process since the 1970s in which Germany played a very active and supportive role.


The initial situation was formed by the economic upheavals of the 1970s, particularly the collapse of the monetary regime of Bretton Woods (the international monetary system created after the Second World War that made the dollar into the anchor currency was described as the Bretton-Woods system). At the same time, neoclassical economic theories prevailed worldwide, particularly in the European integration process. Markets in general and financial markets in particular gained importance and magnitude. Collective wage negotiations and social security were increasingly regarded as harmful and obstructive to economic development. State indebtedness was considered negative since the state should keep out of the economy. Stutzle describes the backgrounds in history of ideas and not only the ideological and political-economic changes of that time.

An increasingly close integration of the state occurred as a reaction to the economic upheavals of the 1970s firstly in Western Europe and after 1990 in Eastern Europe. That integration was and is marked by those ideological upheavals through which so-called neoclassicism became the dominant political-economic paradigm. Stutzle dedicates large sections of his book to these developments from Bretton Woods, the European domestic market, the European monetary system and the European monetary union to the Euro crisis. In meticulous detail, he analyzes the positions and resolutions of the actors, identifies contradictions and explains political decisions. This historical precision that goes along with a marked sense for theoretical economic questions is the strength of the book.

In Stutzle’s analysis of European integration, the conflicts between the two most important Euro states Germany and France represent a clear central thread. With these two countries, two European stability cultures meet as Stutzle stresses. In France as in southern European countries, monetary-, financial- and economic policy were and are state means for creating jobs and prosperity. An active political-economic role is incumbent on the state. For Germany, on the other hand, as for other central- and northern European countries, currency value stability, a strong currency and export success were and are paramount goals. The primacy of an independent monetary policy, a reserved financial and economic policy and a moderate wage development follows.


Germany dominates. This one fact is clear about Europe’s state today, how it is set up institutionally and what political prescriptions are used to “solve” the Euro crisis. That this dominance is often willingly forgotten is not new. Stutzle emphasizes Germany enforced price stability as the highest goal – already at the time of the European monetary system when the D-mark was the key European currency and the German Bundesbank de facto determined monetary policy even in Paris and Rome. Germany ensured that the European Central Bank was politically independent (and therefore could not directly purchase any government bonds from states, an instrument that is urgently needed today). It was Germany that strictly resisted financial adjustment measures in Europe and actually prevented these mechanisms – long before and in the monetary union (With that, another instrument that could be helpful is lacking today). And it was Germany that repeatedly resisted the French proposal of a European economic government both before and during the Euro crisis.

Above all Germany enforced its dogma of the balanced state budget (described by Stutzle more neutrally as a “model”). Germany repeatedly pressed for a limitation on debt states and/or new indebtedness in the European negotiations over treaties and agreements. The different German governments were in no way the only actors who helped neoliberal policy and the dogma of the balanced state budget to breakthrough. The different governments of France and southern European countries are complicit here alongside the governments of other countries in central- and northern Europe, powerful capital groups and European institutions like the European Commission and the European Central Bank. They repeatedly accepted neoliberal demands and ideas that were ultimately false and disastrous in economic policy – in part strategically motivated to attain a unity in the European zone and partly and increasingly out of their own conviction.

The description of such political developments and decisions is the focus of this book. But Stutzle does not remain on this descriptive plane. In several more analytical passages toward the end, he makes clear that the relation between neoliberalism and state indebtedness is inconsistent. On one side, neoliberalism needs state indebtedness; on the other side, it condemns state indebtedness. Together with a Europeanized dogma of the balanced state budget, heavy state debts legitimate the austerity policy on the national plane and justify cuts and social dismantling. In this way, the dogma established on the European plane has effects in the individual states. The dogma hardens and grows stronger. The root for the increasingly authoritarian character of “fighting crises” in Europe lies here. Stutzle takes up and names this aspect. Finally, neoliberalism is brutal and authoritarian contrary to the self-image as “liberal” and “democratic.” This cannot be said often enough. For neoliberalism, state indebtedness is an authoritarian disciplining instrument.


Stutzle’s book “Austerity as a Political Project” is a shortened version of his dissertation supplemented with passages on the Euro crisis. The text in its original version is clearly an academic treatise. For example, extensive theoretical economic statements and reflections are found at the beginning. Stutzle presents three theoretical groups, neoclassical, Keynesian and Marxist economic thinking and ultimately positions himself as a Marxist. The introductory theoretical reflections are largely dispensable for understanding the main part of his book, the political and historical explanations on the European integration process.

This book can be recommended without reservation to everyone who wants to be informed about the historical and political foundations of today’s economic-, financial- and monetary discussions in Europe. Stutzle clears away many clichés and assertions about the genesis of the economic- and monetary union. He shows how the neoliberal dogma of the balanced state budget was implemented – in the first place by Germany. In addition (and this is a special quality of his book) he emphasizes how this dogma is used by interested circles to justify social cuts, precariousness and de-solidarity.

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