NextGenerationEU and the Future of the European Monetary Union: Shifting Interests and New Fractures in the German Power Bloc

Abstract

Based on joint borrowing and a significant transfer component, NextGenerationEU stands in contrast to Germany's longstanding rejection of a ‘debt’ and ‘transfer union’. This article probes into the determinants of this shift in Germany's European policy approach. Focusing on the conflicts in Germany over the ‘deepening’ of the Monetary Union through fiscal capacity building between 2015 and 2020, it investigates which actors, interests and strategies instigated this shift. The analysis is based on trade and exchange rate data, a qualitative document analysis of position papers as well as expert interviews with interest group representatives, parliamentarians and civil servants. Theoretically, the study draws on concepts from regulation theory, materialist state theory and neo-Gramscianism. It argues that even though not a fundamental paradigm shift, Germany's push for NextGenerationEU indicates a strategic re-orientation of parts of the German power bloc towards European fiscal integration, amplified by recent geopolitical dynamics and crisis tendencies.