Between a Rock and a Hard Place: The Grand Coalition's Response to the Economic Crisis

The German grand coalition's track record with regard to managing the financial crisis is mixed. The government has spent enormous amounts of money to prevent a breakdown of the banking system and to cushion the effects of the recession. It was at least partially successful as these programmes indeed prevented collapses of banks as well as bank runs, kept unemployment relatively low and somewhat mitigated the recession. Nonetheless, at least some of the crisis policies lacked coherence, particularly with regard to the bank rescue packages. The reason is that even in the face of a systemic banking crisis and a GDP decline of 5 per cent, programmatic differences between the coalition partners have not disappeared and became manifest in government policies.