The Big Illusion? Germany, the Coalition Talks and the Hope for More Europe
The level of disconnect between Germany and the rest of Europe is starting to take on dangerous dimensions. So how come Germany increasingly complains about being the "victim" of the single currency and needing to "pay for the others"? Why does the word "Transfer-Union" inflame any given German town hall discussion on Europe? European solidarity doesn't sell well in blue-collar Germany, which is suffering heavily from real income losses.
Mid-October I attended a pretty important conference gathering policy makers from most European countries, and obviously, the talk was about…Germany, Germany in Europe and Germany and the Euro. Nearly as if no other country – barely France – matters for the European future. All eyes were again turned to Berlin and the possible outcome of the coalition agreements.
Indeed, Germany may matter most for the European policy shaping of the month to come in still critical times for the eurozone. But does Germany care about Europe? Not so much, it seems. Whereas foreign observers desperately try to detect e.g. decisive German moves on banking union or joint backstop in the subcommittee on Europe of the coalition negotiations, the German papers are full of " Maut-Gebühren", the CSU provincial proposal on fees for "strangers" on German highways, as if the German political life depended on it. The level of disconnect between Germany and the rest of Europe is starting to take on dangerous dimensions!
Germany does well and seems happy about it. Just a couple of days ago, a huge German export surplus of some 20 billion was celebrated on German prime time TV, showing pictures of the busy container port in Hamburg. Nobody inside of Germany would call this a "problem"; only the IMF and the EU Commission [DE] do so – two institutions outside of Germany.
The Germany hype affects authors and intellectuals in neighbouring countries. Two recent essays, one Italian, and one French, celebrate the German model. Angelo Bolaffi [DE] und Alain Minc [FR] are sort of competing in praising Germany. As a German, you wonder whether you should blush. Germany, so both authors proclaim, does not only have a strong economy and is adapted to global markets; it also has the only viable social model for Europe; it is per se the social-economic model for Europe. In short: it is no longer about living like God in France (a German saying), but about living like God in Germany. Germany bashing is out; Germany becomes the European role model, so it seems.
There are two problems with this. First, some Germans at least would probably contest that they are living like Gods. For instance there are more than 1 million children [DE] who live in poverty; or most of the Harz IV recipients. Second, there is a European dimension. Is Germany getting more than its fair share from the single currency? And does it show enough solidarity with its European neighbors? Solidarity is the hidden elephant in the room, when it comes to the question of debt mutualisation in whatever form, be it through a redemption fund, a joint backstop in banking union or a budget for the eurozone, as the French Minister of Finance, Bercy [FR], was recently calling for. And at some point, waiting for Godot won't be enough as an answer. The Euro-system will need to decide. And as things stand today, it is likely to decide in the wrong direction: slow dismantling for the eurozone by default of common convincing action.
The story told in Germany against more solidarity is that the German economic success of recent years relates to hard working Germans, a successful labor market reform in the beginning of the last decade and tough savings in public finance. Voices outside of Germany relate the success rather to a low income sector [DE] closed to social dumping, a one-size-fits-all monetary policy of the ECB that suits Germany particularly well and a particular gain from the single market, precisely due to exports: McKinsey analysts say, based on their study from 2011, that the overall aggregated gain of the eurozone over the period of ten years (2002 to 2012) has been 300 billion, out of which half for Germany, a quarter for Italy and the other quarter for the others. A third of the German growth can be traced back to the introduction of the euro.
So how come Germany increasingly complains about being the "victim" of the single currency and needing to "pay for the others"? Why does the word "Transfer-Union" inflame any given German town hall discussion on Europe? How come – despite evidence of huge euro gains – more solidarity with Europe seems not to be on the cards of the new government?
A good taste of arguments circulating in Germany is the book of Dominic Geppert, a historian of Bonn University: " Ein Europa, das es nicht gibt ," [DE] which resonates hugely in conservative circles and basically reads like a 20-year long story of systematic betrayal though a euro, that Germany never wanted in the way it exists today, and in which it is just in through the mistake of a more or less too romantic Helmut Kohl.
It is difficult to imagine audacious steps of euro-integration under these circumstances, and this is what the SPD seems to be experiencing now. No wonder - at least in regard to the feeling that the past few days of coalition talks have conveyed – that Germany is backpedalling from any ambitions of deeper (fiscal) integration – be it a joint backstop in banking union, redemption fund or something else. The Single Resolution Mechanism (SRM) with a European authority at its top seems to be questioned again, as well as the agreement to use the ESM as a guarantee for stumbling European banks. And the SPD, on which so many outside of Germany had placed hopes to ardently fight for these things, is astonishingly silent. It may be for tactical reasons only, as it may not be wise to write a fully-fledged German Europe-strategy into the coalition agreement. But tactics are probably not the most important reason for the silence. The looming Urabstimmung, the SPD party vote, which will decide over the coalition agreement, might be another plausible answer. European solidarity doesn't sell well in blue-collar Germany, which has suffering heavily from real income losses. It is hard to convince voters in these circles that German money is better spent on Greece than for education or the renewal of German Rhine-bridges (one out of two being morbid).
Even though the research institute of the SPD, the Friedrich-Ebert-Stiftung has probably been smartest among many German foundations to produce dozens of policy papers on the future of the eurozone [DE], including the need for fiscal federalism – if the eurozone does not want to risk break-up, even if the party knows what should be done, the ideas do not travel the long way from research to policy implementation.
This is clearly not what leading policy observers in Europe have hoped for. Time has come to realize that the SPD cannot deliver in the way that many European and international observers had expected it and it remains unclear for now what this means. Just that something in Germany with respect to Europe is definitely changing and the gap between rhetoric and reality becomes ever bigger.
Dr. Ulrike Guérot is the Senior Associate for Germany with the Open Society Initiative for Europe (OSIFE) and a Senior Fellow with the Atlantische Initiative, the publisher of atlantic-community.org where she will continue her ‘Berlin Notebook' Blog.