To play or not to play the ‘moral hazard card’: Germany and the European Union’s response to the Covid-19 crisis

Avoiding moral hazard is a recurrent argument of those seeking to limit the development of European financial support mechanisms. Germany has been the traditional leader of this coalition of actors in the European Union (EU). However, in reaction to the Covid-19 pandemic, Germany supported an EU response which included grants and massive debt issuance. What was previously presented as unacceptable – because of moral hazard – became appropriate. This contribution seeks to explain why the German government ceased to emphasise the moral hazard problem in EU economic governance. We argue that the answer is not because of a challenge to the relevance of moral hazard per se, or because the Germans lost interest in the moral hazard problem, but rather because German policymakers were discursively constrained by one of the dominant meanings of moral hazard they had previously imposed – which lost its relevance in the context of a symmetric exogenous shock.