9 - When the Music Stops: The German Politics of the Greek Bailout

Summary

The chapter utilizes an in-depth case study, which draws from in-person interviews with administrative and political elites in the German government, archival work, and secondary sources, to illustrate the likely electoral effect when hidden strategic delay fails. I trace the history of negotiations leading up to the first bailout in Greece in 2010 to analyze the electoral effects of EU negotiations in Germany. The case study is particularly interesting, because it is a case of “failed” delay. Due to a large segment of the population opposing a financial rescue package for Greece and an important regional election, the German government had attempted to delay a bailout to Greece until after the election, publicly stating that it opposed such a bailout. Because of an unexpected and very rapid deterioration of the economic situation in Greece and the Eurozone, the German government agreed to a bailout just a week before the election. The case provides us with a rare chance to analyze the counterfactual in a situation where the delay did not work. In this situation, my theory would predict the German government would lose public approval as a consequence. Supporting this, I demonstrate in the case study that voters were opposed to the bailout and punished the German government for its decision to pursue it.