Saturday, February 28, 2015

The Return of the German Question

From Giovanna Maria Dora Dore, at the American Interest (via Instapundit):
The geopolitical dilemmas that Europe struggled with for centuries have returned in geo-economic form, centered on the conflict between creditor and debtor countries locked in a single currency.


The euro crisis has undermined the “Europe of Maastricht status quo” that was shaped to a significant extent by Germany, including the concept of the ECB, the culture of fiscal stability, and the politics of EU enlargement. Germany now faces the challenges of overcoming the status quo to which it adjusted more successfully than any other country in the EU (thanks to the economic power it gained over the past half a century), and the growing political and economic weakness of its EU partners. The UK’s obsession about sovereignty and its ambivalent attitude about the EU has made Britain irrelevant to Germany. The Franco-German axis at the heart of European integration has become lopsided, with power shifting sharply towards Berlin. This has paved the way for Chancellor Merkel to set in place intergovernmental mechanisms for crisis management, and thus move executive decision-making from the 27 countries of the EU and the European Commission to the 18 countries of the Eurozone. These new cooperation mechanisms outside EU treaties demonstrate the failure of the “Europe of Maastricht”, and especially the impossibility of a European Germany.

The institutions and policies that previously almost perfectly matched Germany’s expectations for the EU now need to be redesigned. Germany is being forced to take on a leading role in shaping a new system and new policies, while at the same time trying to convince the rest of the Eurozone that its insistence on a more competitive EU is neither an expression of economic dogma nor a quest for political dominance, but rather the result of a sober analysis of the challenges of globalization to the EU. With 7 percent of the world’s population, 25 percent of global economic output, and 50 percent of the world’s social expenditure, the EU needs to strengthen competitiveness if it is to ensure prosperity, address inequality, and maintain social cohesion.

There’s little doubt that the future of the EU hinges on Germany’s decision about its direction. Yet, it is not clear what Germany wants to do with Europe, and how other member states can use Germany’s economic and political weight to develop a global strategy for the EU. Germany remains reluctant to discard the Maastricht order completely, because it does not want to take on further responsibility for Europe. Nevertheless Germany faces a choice: it can either recommit to partnership with the rest of the EU and exercise benign economic hegemony within the Eurozone as the price for this commitment, or it can be a more normal EU member state that pursues its national interests in a narrower way, which will increasingly bring it into conflict with the EU’s other member states.

Germany has signaled that it will do whatever it takes to save the euro. Yet observers fear that Germany’s determination to save the euro could lead to a two-speed Europe. On the one hand, deepening the integration of economic policy among the 17 Eurozone countries could result in a split between them and the other ten member states, who could find access to the single currency much more difficult or even find themselves permanently excluded. On the other, German leadership could deepen the schism between the debtors and creditor countries, with a growing competitiveness gap between these two groups as a result of the “bail-in” and the continuing debt burden on the indebted countries.

Germany is too big to fail and the biggest country in Europe, but still not big enough to be the EU’s hegemon. At a time when Germans have lost their romantic attachment to the EU, the other 26 member states need to go through the same process of re-invention that Germany has embarked upon and design a new approach to Europe that can secure their national interests. Success in this task might give the EU the Germany it needs—and it might just give Germany the Europe it wants.
An interesting piece. RTWT.

Plus, on the original German question, see the outstanding William Keylor, The Twentieth-Century World and Beyond: An International History since 1900.