Germany

Abstract

Abstract Germany is a high tax country, a large and open economy, and it shares a border with three globally important offshore financial centres: Switzerland, the Netherlands, and Luxembourg. Indeed, private individuals and firms make substantial use of these tax havens. However, Germany is not exclusively at the receiving end of offshore finance. From the early days of the Eurodollar markets, offshore money creation was a lucrative business for Germany’s big banks. Consequently, offshore finance affects state power through both sides of its balance sheet: taxation and money creation. Via the politics of the invisible, this has allowed successive German governments to pursue contradictory economic policies without being questioned. It also provided the state with access to preferential offshore liquidity to pay for reunification. Yet, these power-enhancing effects where limited to the good times. During the constitutional crisis of the Weimar Republic as during the 2007–09 global financial crisis, offshore finance unfolded destructive forces. However, contrary to the Weimar Republic, contemporary Germany has built domestic institutions mitigating these power-undermining effects. The state found means to reap the benefits of offshore finance, while keeping the costs outside the state.