Europe's German Future

From Christopher Caldwell, at the Weekly Standard, "Über Alles After All":

Last week Germany reclaimed its status as the leading power in Europe. In the two years since it became apparent that Greece was, essentially, bankrupt, there have been dozens of emergency meetings of the countries that use the common European currency, the euro. Most of the euro-using states believe that Germany—with a booming industrial economy, vast trade surpluses, a reputation for fiscal probity, and a history that makes it reluctant to reject the counsel of France—ought to cover the bill. Germany has long argued that Greece must become competitive again by selling off state assets and cutting government handouts. More recently, Germany has added another demand—that EU authorities be empowered to discipline Greece and other delinquent countries. At the Brussels summit on January 30, the Germans won.

Germany is fortunate to have, in the moment of its triumph, a chancellor who does not scare people. Angela Merkel is an East German intellectual, a physical chemist, the childless daughter of a clergyman. She mumbles. Her taste in clothing runs to pantsuits. She isn’t brawny and forceful like her Christian Democrat mentor Helmut Kohl, who presided over the reunification of Germany at the end of the Cold War. She isn’t eloquent and haughty, or tempestuous and randy, like her Social Democratic predecessors Helmut Schmidt and Gerhard Schröder, respectively. “This lack of a presidential demeanor is a big advantage,” says longtime Bavarian governor Edmund Stoiber, whom Merkel replaced as party leader. Germany’s economy naturally provides it with a leadership role, but its history means that that role is something Germany cannot be seen to claim. “Neither personally nor politically does she come off as wanting to blow her own horn, along the lines of ‘I am the leader of Europe.’ ”

By “Europe” Stoiber means the 27 countries that make up the European Union. The EU was launched in the wake of the Second World War as a way to organize Europe through economics, not war. This is a polite way of saying it was meant to keep Germany from dominating Europe with its army. A decade ago, the EU acquired a common money, the euro, which replaced the franc, the lira, the peseta, and the super-strong deutsche mark. The new monetary regime was meant to keep Germany from dominating the continent with its currency.

But the euro has backfired. In 1990 British trade secretary Nicholas Ridley was forced to resign for calling the EU “a German racket designed to take over the whole of Europe.” Ridley was quite wrong about Germany’s intentions, but he was right about the result. Joining Germany in a currency union meant playing by its rules. In fact, so big and rich is Germany—particularly now that reunification has brought its population to 80 million—that joining it in anything means playing by its rules. This is not Germany’s fault. It is the classic “German problem” that has confronted Europe for the whole modern era. It was camouflaged for six decades only by Germany’s reluctance to express any wishes whatsoever.

As long as Germany wasn’t complaining, others could make free with Germany’s credit card. Once in the euro, Greece, Italy, Spain, and other countries that bankers used to consider reckless or unstable could borrow at the same rates. (The treaties that bound all these dissimilar countries together stipulated that there would be no bailouts for those who borrowed too much, but bankers obviously didn’t believe that.) A boom in lending pushed up wages and prices in those “peripheral” countries, rendering them uncompetitive. After the financial crisis of 2008, the countries that had overborrowed were saddled with more debt than they could comfortably repay. The eurozone’s Mediterranean members have come to think that Germany ought to rescue them. But the Germany to which they are addressing their petitions is not the penitent, diffident, and easily browbeaten land that they came to know over the last three generations. Germany has its own ideas about economics and morality, and it is ready to insist that its weaker neighbors adhere to them.

That's a great piece --- pretty accurate all around.

Continue reading at the link.