When, in April, Wolfgang Sch?uble, Germany’s finance minister, sharply criticised the policies of the European Central Bank, he was expressing a distinctive macroeconomic approach which shapes the views of German economists and policymakers alike. It is based on the strong conviction that problems of aggregate demand are of secondary importance as long as prices are sufficiently flexible. This explains the German insistence on structural reform as the solution to almost all economic problems and the quasi-religious fixation on the “black zero”, the balanced fiscal budget with no red ink.

On the face of it, this German exception in macroeconomics is difficult to explain. Students in Germany read the same textbooks as their counterparts in other countries, and in advanced studies the same economic models are used. But behind the textbooks and models lies an economic philosophy called “Ordnungspolitik” which is not found outside Germany. Its guiding spirit is Walter Eucken, who taught at Freiburg university until his death in 1950. In a recent speech marking what would have been Eucken’s 125th birthday, Angela Merkel, the chancellor, insisted that the principles of the “Freiburg school” remained relevant.

There were two aspects to Eucken’s economic philosophy, one positive, the other negative. On the positive side was a commitment to freedom of contract, open markets, private property and robust antitrust policy. On the negative side was a rejection of Keynesianism.