German-Led Eastern Austerity
Ordoliberal discipline and asymmetric union
German economic doctrine shaped the eurozone and the eastern enlargement into an asymmetric arrangement. Surplus recycling, wage suppression, and fiscal rules bind Central and Eastern European economies as low-cost supplier peripheries.
Damage
German-led fiscal orthodoxy constrained Eastern and Southern policy room inside the eurozone.
Value lost
Foregone fiscal space and wage compression under rules Germany shaped
Record Points
- German manufacturing built extended supply chains in Central Europe using lower wages across the border.
- A large share of profits from eastern subsidiaries is repatriated to German parent firms rather than reinvested locally.
- Eurozone fiscal rules, modeled on German preferences, constrain public investment in weaker members.
- Wage and tax competition keeps eastern members locked into assembly and component roles.
- The union runs a persistent core-periphery gradient dressed up as shared convergence.