Only a decade ago, slow growth and high unemployment plagued Germany, but the 'sick man of Europe' has nowmoved to outperform the eurozone average growth since the second quarter of 2010. While Germany isprospering, the peripheral countries in the eurozone are confronted with a severe sovereign debt crisis. It startedin Greece, but soon spread to countries such as Ireland, Portugal, and Spain. In the course of the debate,Germany was blamed for the imbalances in Europe. However, this argument is vehemently disputed withinGermany. Chancellor Angela Merkel points to the flagrant lack of fiscal discipline in many of the peripheralcountries. Some economists, such as Hans-Werner Sinn, Munich, even disputes that Germany was the mainbeneficiary of the eurozone. This paper analyzes the two sides of the controversy and asks whether we arewitnessing a more inward-looking and Europe-sceptic Germany. These issues will be analyzed by first focusingon the role of Germany in resolving the sovereign debt in Greece, and the subsequent EU-negotiations for apermanent rescue mechanism in December 2010. We conclude by discussing some possible explanations forGermany's more inward looking and more Euro- sceptic positions during these negotiations.
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