Germany: A test of strength
By Quentin Peel
Published: April 11 2011 21:34 |
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| By the horns: lampooning German support for the ailing eurozone members at last month’s Cologne carnival |
In the curious political blame game that is the daily bread and butter of the European Union, it seems there is one country that can never win: Germany. Europe’s most populous and economically powerful country may be by far the biggest guarantor of a rescue fund for its cash-strapped eurozone partners. But that has not spared Berlin the brickbats from Greece, Ireland and now Portugal, where the popular feeling is that German meanness – not generosity – is partly to blame for austerity programmes those countries are being forced to adopt.
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It is the latest manifestation of a dilemma apparent since Germany’s defeat in the second world war.
It is the latest manifestation of a dilemma apparent since Germany’s defeat in the second world war.
“The first law about Germany is that they are always wrong, like the Americans are for the French,” says Gérard Errera, former secretary-general of the French foreign ministry. “If they are assertive, they are accused of building the Fourth Reich. If they are against war in Libya, they are useless.”
The past 12 months have aggravated this dilemma. The eurozone crisis has accelerated the emergence of Germany as the dominant partner in the EU, a process that has upset many fellow members. Berlin has been accused of being both high-handed and miserly, of imposing its model of strict budgetary discipline while ignoring its own faults.
The shift has upset the balance of power in Brussels. Officials at the home of the European Commission, the bloc’s executive wing, joke that the first question asked about any legislation is: “What is Berlin’s position on this?”
Most important, France has been forced to play second fiddle to its closest partner. For all EU members, German ascendance presents a challenge of adaptation to which they are only just adjusting. For Germany, the reluctant hegemon, it is also an unfamiliar and uncomfortable position.
“Rarely has Germany been as important in Europe – or as isolated – as it is today,” say Ulrike Guérot and Mark Leonard in a new pamphlet for the European Council on Foreign Relations. “There has been a kind of ‘unipolar moment’ within the eurozone: no solution to the crisis was possible without Germany, or against Germany.”
How Berlin and its partners manage the change will decide the future of the EU and the survival of the euro. Germany has long been one of the most passionate supporters of European integration. Some German analysts fear that if the country finds itself both dominant and disliked, it could abandon that commitment.
More than 20 years after unification restored national sovereignty, Germany remains uncertain of its international role. Meanwhile, from Washington to Beijing, while Germany’s economic prowess is beyond dispute, its political influence is questioned.
Just as it dominated decision-making in the eurozone crisis, Berlin abstained on Libya – refusing to participate with its closest Nato allies in enforcing the UN-sanctioned no-fly-zone.
Last month’s decision by Angela Merkel, German chancellor, to order a U-turn in nuclear policy, and the closure of seven power stations after the Japanese earthquake, shocked neighbours such as pro-nuclear France. It showed that Berlin, like the UK and France, put domestic priorities first.
She also alienated non-members of the eurozone by launching with France a “pact for competitiveness” based on the 17-member currency union, not the 27-member EU. Some fear it will lead to a “two-speed” EU. Donald Tusk, the normally mild-mannered premier of Poland – not a eurozone member – called it “humiliating”.
As Ms Guerot and Mr Leonard note: “Although Germany has now signalled it will do what it takes to save the euro, much of Europe is worried about the way this will be done, and even resentful about where Germany seems to be heading.”
Since the Greek debt crisis triggered a fundamental debate on the future of the euro, it has been Berlin that has determined the focus – and pace – of crisis management. Initially it was Ms Merkel who delayed a rescue until a radical austerity programme had been negotiated. Against fierce resistance from President Nicolas Sarkozy of France, the European Central Bank and her own finance ministry, she insisted that the International Monetary Fund be involved.
Then it was the chancellor who put the largest amount of money on the table, in one traumatic weekend last May, to guarantee a massive €440bn insurance fund to prevent contagion from Athens undermining the entire monetary union, and persuaded her deeply sceptical supporters in the Bundestag to back it.
She also insisted on an amendment to the European treaties – against the opposition of almost every other leader – to set up a permanent “stabilisation mechanism” to head off future crises. “German handwriting was all over” last month’s EU agreement on a comprehensive strategy for the eurozone, senior officials from Berlin proclaimed proudly at the time.
In the chancellor’s office, her closest advisers reject the suggestion that Germany’s European “vocation” – and Ms Merkel’s own commitment – are in doubt. “Everyone hammered the chancellor for delaying the rescue package for Greece. But it was Merkel who saved Europe,” says one.
Last May, a week after EU leaders and their finance ministers cobbled together a €750bn eurozone rescue package, the chancellor defended the deal to her domestic audience. “If the euro fails, it is not only the currency that fails but much more,” she said. “It is Europe that fails, and with it, the idea of the European Union.” She has since repeated that claim, in speech after speech, to reassure voters that the EU is not simply a “transfer union” in which taxpayers’ money is handed over to spendthrift “sinners” in the eurozone periphery.
The argument goes down badly elsewhere in the EU. “If there is an example of how Germany smells like a hegemon but dresses like an accountant, it is this one,” says Ana Palacio, former Spanish foreign minister.
Ms Guérot and Mr Leonard fear a “dialogue of the deaf” in the EU. “Within their country, many Germans themselves feel more victims than aggressors,” they say. They are “proud of the reforms that Germany has implemented during the past decade, which have boosted the productivity and competitiveness of a German economy previously burdened by the costs of unification. But the euro crisis has unleashed a wave of resentment about the perceived costs Germany is now being asked to pay for others’ profligacy.”
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From the outside, Germany’s economic performance is justly envied. Its recovery from the global economic crisis has been remarkable, with business confidence booming, industrial orders up 2.4 per cent in February, export orders already above pre-crisis levels, and unemployment the lowest since unification.
Yet pollsters report that unemployment, fear of inflation and concern about declining public services are the highest priorities for most voters. Today’s united nation is older and poorer than the former western Germany, with a shortage of skilled workers. Voters are anxious about immigration and falling school standards.
The political order dominated by the centre-right Christian Democratic Union – Ms Merkel’s party – the centre-left Social Democratic party (SPD) and the small, liberal Free Democratic party, has splintered into a five-party system with the rise of the Greens and the far-left Linke party, including former East German communists. National and local coalitions are growing ever more complex, and political decision-making more paralysed. Popular protest – as in the anti-nuclear movement – is back in fashion.
Ms Merkel faces critics for her European policies from both right and left. “There is a concern about a populist reaction against the euro and the EU in some other countries, such as the Netherlands and Sweden,” says Volker Perthes of the Berlin-based German Institute for International and Security Affairs. “That is something that impresses and worries the ruling coalition here.”
Yet there is no sign of any populist figure who might lead such a movement in Germany. Joschka Fischer, former foreign minister and co-founder of the Greens, believes the fear is exaggerated.
However, he says, Ms Merkel has failed to provide clear leadership. “She never tried to make people proud of our recovered strength,” he says. She should have argued that “our national interest number one is the success of Europe – that we have to invest, because we are the strongest”.
He fears that German foreign policy has no “structure”. After the second world war, Germany needed to get on its feet again – morally, politically and economically. “Step-by-step [we wanted] to do everything to be welcomed again and to be defended against Russia, and to try to convince our neighbours that we had learnt the lesson now, we were good neighbours.”
That period ended with unification and the regaining of full sovereignty in 1990. “Once this was realised, what is the German tradition? You have a huge country, stronger than ever since 1989, in the centre of Europe, not knowing what to do,” he says. “The German reaction is provincialism: leave us alone. Don’t torture us with all these problems of leadership.”
The country that faces the greatest problem in adapting to the new German reality is France, whose postwar reconciliation with its former enemy has always been at the heart of the EU project.
“The obsession in France is not about German power in diplomacy and world standing. They don’t have that,” says Mr Errera. “The French are worried economically. The obsession is the décrochage – decoupling. Ten years ago the figures were all in our favour – employment, growth, external trade, everything. Today it’s the other way round.”
The trouble with Germans, he believes, is that they are “awkward”. “They don’t know how to get away with their contradictions. They have always resented and envied the way the French behave.”
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German politics pose another huge complication. “We always forget that it’s a federal country with a coalition government. If [the UK] prime minister or our president says we will do something, that is usually the policy. If Ms Merkel says something, she still has to consult her coalition partners and the constitutional court.”
Mr Perthes sees the problem compounded by contradictory external expectations. “Germany is under pressure to show more leadership, on the one hand. But our partners are also concerned that Germany should show some reservation, as it did before unification.”
Part of German hesitation is reflected in a lack of strategic thinking, he says. “We have great specialists on the internal situation in Russia, for example. What we don’t have are so many people who take that knowledge and draw strategic conclusions. You will still find people here who say: ‘We don’t want to think about policy or strategy’.”
The challenge for Germany’s partners is to decide what sort of nation they really want: hesitant or assertive. The challenge for Germany is to reconcile its instinctive provincialism with its global role.
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BRUGES
The speech that sparked fears of a new Iron Lady
When Angela Merkel, the German chancellor, spoke last November at the College of Europe in Bruges, she must have been aware of the moment when the previous most prominent female politician in Europe used the same stage for a major pronouncement.
Margaret Thatcher chose the city in north-west Belgium in 1988 to deliver her famous – some say infamous – Bruges speech that came to define British euro-scepticism.
“We have not embarked on the business of throwing back the frontiers of the state at home, only to see them reimposed at a European level, with a new European super-state exercising a new dominance from Brussels,” the British prime minister of the day said.
The speech deeply offended Britain’s European partners. It was a seminal moment for UK attitudes towards Europe, for the speech split the Conservative party and caused the eventual resignation of Sir Geoffrey Howe, foreign secretary and deputy prime minister. That in turn led to the end of Mrs Thatcher’s premiership two years later. Britain’s relationship with Brussels has never been the same again.
Ms Merkel’s speech in Bruges to the students of the current academic year was certainly not intended to have such dramatic effects. But it has rung alarm bells in Brussels, and brought sharp criticism from Jacques Delors, former president of the European Commission and father of the euro.
The German chancellor was speaking just days after the European Union summit in Brussels last October that gave the green light to a treaty change – inspired by Ms Merkel herself – to allow the establishment of a permanent “crisis resolution mechanism” for the eurozone.
She used the speech to give notice of a new attitude in Berlin, although she first paid fulsome tribute to the importance of the EU in enabling the reunification of Germany in 1990.
“German unity and European unification are two sides of the same coin,” she said. The former would have been “absolutely unthinkable” without the latter.
But she then proceeded to question the very core of the theology in which the students at Bruges – many of whom will become future EU bureaucrats – are being schooled. She attacked the limitations of the “community method”, according to which the European institutions – the European Commission and the European parliament in particular – are the true defenders of the EU against the narrow national interests of its member states.
Instead, she said, there was a “union method” that centred on the decisions of the member states represented in the European Council. It was just as important as the “community method”, if not more so.
To true believers, those words are almost as alarming as Mrs Thatcher’s speech.
MONETARY UNION
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Germany holds the future of the European Central Bank in its hands. Until February, Axel Weber, president of the Bundesbank – on which the ECB was modelled in the 1990s – was the frontrunner to succeed Jean-Claude Trichet, who steps down as president in late October. But Mr Weber shocked Berlin – and the eurozone – by announcing his resignation. Now Italy’s Mario Draghi is favourite. He has cast himself as being as hardline as any German Bundesbanker – a necessary qualification if he is to win essential backing from Berlin.
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Copyright The Financial Times Limited 2011
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