Daniel Mertens

Putting ‘merchants of debt’ in their place: the political economy of retail banking and credit-based financialisation in Germany

ABSTRACT Why did household debt in Germany not increase after the year 2000? This article offers a supply-side explanation for this deviant debt trajectory by tracing the historical evolution of retail banking in the German political economy. It argues that at the end of the 1990s and in the light of European Monetary Union, profitability issues and banking fragmentation became severe enough to interrupt the path towards credit-based financialisation as prevalent among other capitalist economies. These factors interacted with a traditional lack of tools and incentives for rapid credit expansion, even though they were renegotiated in the processes of financial liberalisation, internationalisation and innovation. By employing historical-qualitative as well as statistical evidence for the argument, the paper’s contribution becomes twofold. First, it introduces and conceptualises retail banking as a focal point in the analysis of national financial systems and their transformation. Second, it complicates the standard accounts of German non-financialisation and reveals the ‘contested’ character of financial reform.

An Index of Fiscal Democracy

Over the past four decades, the accumulation of policy legacies and public debt has led to a decline in fiscal flexibility in Germany and the United States. By applying an index of fiscal democracy to Germany, the paper illustrates the associated shrinkage of democratic control over budget priorities and compares the developments in both countries.

Building a hidden investment state? The European Investment Bank, national development banks and European economic governance

ABSTRACT The European Commission’s Investment Plan for Europe and the enduring economic crisis has brought state-owned development banks again to the fore of public and scholarly debate in Europe. This article proposes to place these banks’ activities and recent institutional co-operation in the context of European integration and assumes a historical perspective on European economic governance and development banking. Most importantly, it argues that the European Investment Bank has become a centre of gravity in long-standing political attempts to increase the investment firepower of the European Union. Based on detailed process-tracing analysis through publicly available data and interview material, the article delineates a gradual process of institutional innovation and network formation that advanced since the late 1980s and culminated in recent post-crisis policy processes. The contemporary visibility of development banking in Europe, we conclude, follows from these and is representative of a nucleus for a – somewhat hidden – European investment state, whose reach and stability, however, is yet to be determined.

Borrowing for social security? Credit, asset-based welfare and the decline of the German savings regime:

This article investigates the question to what extent Germany fits into the recent trend of credit-based social policy that has originated in Anglophone economies. In the course of the financial crisis and with its preceding increase in private indebtedness in mind, a growing number of scholars have argued that loans to households have become a central component of contemporary welfare states. Because of comprehensive savings-promotion schemes, high levels of public welfare provision and a low homeownership rate, the German welfare state conventionally figures as the paradigmatic counter case to this intensifying relation between welfare and finance. This article argues, to the contrary, that one can observe the rise of credit-based social policy in Germany due to the gradual erosion of savings promotion, the expansion of quasi-public loan schemes and the restructuring of the welfare state since the mid-1970s. Based on document and statistical analysis, the article evaluates reform trajectories in the field of pensions, education and healthcare to substantiate this claim. Within the current low-interest rate environment in the Eurozone, the developments combined might well challenge the traditional savings-oriented features of the German welfare state and its political economy.

Pensionsfonds-Kapitalismus und privatisierter Keynesianismus: Zur Finanzialisierung privater Haushalte

Dieses Kapitel untersucht, wie sich Finanzialisierungsprozesse auf Privathaushalte ausgewirkt haben und inwieweit auch beim Verhalten und Handlungskontext der Haushalte von einer Dominanz des Finanzsektors, der Finanzmarkte und der Finanzmotive gesprochen werden kann (Epstein 2005, S. 3). Konkret verstehen wir unter der Finanzialisierung von privaten Haushalten, dass diese unmittelbarer als zuvor in Finanzmarkte eingebunden und dadurch zahlreichen Risiken ausgesetzt sind, die zuvor von kollektiven Akteuren oder von professionellen Intermediaren, wie Banken, ubernommen wurden (vgl. Martin 2002, S. 12).

Market-based but state-led: The role of public development banks in shaping market-based finance in the European Union:

This paper examines the European Union’s strategy of governing the economy through financial markets by focusing on the largely unacknowledged role of public development banks, including the multilateral European Investment Bank. It argues that these state-owned financial institutions have moved into a key position in the recent evolution of the European financial system and economic governance. Since the crisis, policy makers have used them to address the intrinsic volatility and excess liquidity of contemporary financial markets, as well as offset the constraints on public investment imposed by institutionalized fiscal austerity. The paper provides evidence for this claim through an analysis of the emergent policy nexus between the Investment Plan for Europe and the Action Plan on Building a Capital Markets Union. Based on official documents and interview data, it specifically traces the risk-sharing devices for small- and medium-sized enterprise and infrastructure finance set up by development banks within these initiatives. Equipped with public guarantees, they have been instrumental for the promotion of securitization markets and public–private partnerships through increased multilevel collaborations among development banks. The anchor role of such quasi-fiscal state actors in shaping capital markets, the paper concludes, has profound political implications, and therefore warrants further scholarly attention.