The Austrian-German Relationship in EMU Reform: From Asymmetric Partnership to Increased Independence

Abstract

The relationship between Austria and Germany is characterised by many political and cultural commonalities and strong economic interdependencies. Moreover, the asymmetry between the two countries, both in terms of economic size and political power, has long time characterised the relationship as one between ‘leader’ and ‘follower’. Yet, despite these strong ties, Austria has assumed an increasingly independent role in recent EMU politics. Therefore, this article asks whether and why the close partnership of the two countries is slowly growing apart. Based on the analysis of three periods of EMU reform, the article shows that Austria followed Germany during the fast-burning phase of the euro crisis (2010–12), became more self-reliant in its slow-burning phase (2012–16), and even opposed German positions in post-crisis reform (2016–20). Converging economic preferences and the strong power asymmetry between the two countries can explain Austria’s cooperative strategy until 2016. By contrast, Austria’s shift from loyal followership towards more pronounced independence is largely caused by domestic developments. The reluctance of the Austrian government to share risks and build joint capacities in EMU reflects a Europe-wide trend, as an increasing ‘constraining dissensus’ at the national level makes it difficult for small state governments to compromise at the European level.