The Fiscal Policies of the German SPD in Times of Crisis

Abstract

Abstract Chapter 7 studies the fiscal policies of the German Social Democratic Party (SPD) party in response to the Great Recession. The chapter first situates the fiscal policies of the SPD in a historic context and uses quantitative content analysis to explore the programmatic response of the centre-left to the economic crisis. This analysis confirms that the SPD accepted austerity as the dominant macroeconomic policy, and the chapter then uses elite interviews to draw out the causal mechanisms that pushed the party towards fiscal orthodoxy. It argues that Germany’s social democrats were not ideologues that had accepted the dominance of the market. Rather, the SPD lacked a clear economic paradigm that could have guided the response to the Great Recession. Weakened by internal conflict, it made programmatic decisions with reference to electoral calculations and remained trapped by its pre-crisis support for economic supply-side policies. Influenced by the dominant interpretation of the eurozone crisis, the party sought to increase its perceived economic credibility and supported fiscal consolidation for both strategic and ideational reasons.