Germany and the Euro-Crisis
Translated by Ciaran Cronin (with acknowledgments to Eric Rosencrantz at presseurop.eu).
These are fateful times. The West and Russia celebrated the anniversary of the victory over Nazi Germany on May 8 and 9, respectively. Here in Germany these are also officially known as "days of liberation." This year the armed forces of the Allied coalition against Germany (also including a Polish unit) marched together in the victory parade. Angela Merkel stood directly beside Vladimir Putin on Red Square. Her presence reaffirmed the spirit of a "new" Germany: the postwar generations have not forgotten that they were also liberated by the Russian Army—and that the Red Army in the process suffered the heaviest casualties.
The chancellor had flown in from Brussels, where, in an entirely different capacity, she had witnessed a defeat of a completely different kind. The picture of that press conference, in which the EU heads of government announced their decision to establish a joint rescue fund for the ailing euro, betrays the fretfulness not of the "new" but of present-day Germany. The grating photo captures the stony faces of Merkel and Nicolas Sarkozy—worn-out heads of government who had nothing left to say to each other. Is it destined to become the iconographic document of the demise of a vision that shaped postwar European history for more than half a century?
In Moscow, Merkel stood in the shadow of the tradition of the old Federal Republic. But in Brussels on May 8, she had behind her the weeks of struggle of a hard-nosed lobbyist for the national interests of the economic powerhouse of the European Union. Appealing to the model of German fiscal discipline, she had blocked a timely joint intervention by the EU to shore up Greece's creditworthiness against speculation aimed at triggering a state bankruptcy. Ineffectual declarations of intent had frustrated concerted preventive action—on the mistaken assumption that Greece was an isolated case.
Not until the most recent slump in the stock market did the chancellor relent meekly, her resistance broken down by the collective psychological massage administered by the presidents of the United States, the International Monetary Fund and the European Central Bank. Out of fear of the weapons of mass destruction wielded by the tabloid press, she seemed to have lost sight of the destructive force of the weapons of mass destruction wielded by the financial markets. She would hear nothing of a eurozone, about which the president of the European Commission, José Manuel Barroso, would declare in the days that followed: if you don't want a unified economic policy, you'll also have to forget about the monetary union.
The momentousness of the Brussels decision of May 8 is now dawning on all concerned. The Anglicizing metaphors prevalent in Germany, in which we are ceaselessly deploying "rescue parachutes" and cobbling together "rescue packages," should not conceal the fact that the hastily agreed-upon emergency measures to save the euro will have different consequences from any previous bailout. Because the Commission is now taking out loans on the market for the European Union as a whole, this "crisis mechanism" is a "Community Instrument" that changes the basis on which the European Union operates.
The fact that from now on the taxpayers of the eurozone bear joint liability for the budgetary risks of each of the other member states amounts to a paradigm shift. This brings a long-repressed problem to awareness. The financial crisis, which has developed into a crisis of the states, calls to mind the birth defect of an incomplete political union marooned in midstream. A common market with a partially shared currency has developed in an economic zone of continental proportions with a huge population, but without the establishment of institutions at the European level with sufficient powers to coordinate the economic policies of the member states effectively.
No one can write off the call by the president of the IMF for "European economic governance" as unreasonable anymore. The models of a "rule compliant" economic policy and a "disciplined" budgetary policy that conform to the requirements of the stability pact do not meet the requirement of a flexible adaptation to rapidly shifting political constellations. Of course, the national budgets have to be balanced. Yet this is not only about Greek "cheating" and Spanish "delusions of affluence" but an alignment of levels of economic development within a currency area with diverse national economies. The stability pact, which France and Germany themselves suspended in 2005, has become a fetish. Imposing harsher sanctions will not be sufficient to counterbalance the undesirable consequences of a planned asymmetry between a complete economic and an incomplete political unification in Europe.
Even the business editors of the Frankfurter Allgemeine Zeitung see "the European Union at a crossroads." Of course, they are merely invoking a nightmare scenario to stir up Deutschmark nostalgia against the so-called soft-currency countries, while a pliable chancellor is suddenly speaking of the need for Europeans to become "more tightly intermeshed economically and financially." But there is not the slightest trace of an awareness of a sea change. Some are blurring the causal connection between the euro crisis and the banking crisis and are blaming deficient fiscal discipline for the entire disaster. Others are eagerly trying to talk down the problem of the overdue harmonization of national economic policies into a matter of better management.
The European Commission intends to put the interim rescue fund for the euro on a permanent footing and to vet national budgets—even before they are submitted to the national parliaments. It is not that these proposals are unreasonable. However, it is outrageous to suggest that such an encroachment by the Commission on national parliaments' budgetary prerogatives does not impinge on the treaties and that it would not exacerbate the longstanding democratic deficit in an unprecedented way. An effective coordination of economic policies must entail an increase in the powers of the parliament in Strasbourg; it will also stimulate the need for better coordination in other policy fields.
The eurozone countries are heading toward a situation in which they will have to choose between a deepening of European cooperation and relinquishing the euro. It is not a matter of "mutual surveillance of economic policies" (Jean-Claude Trichet) but of concerted action. And German politics is woefully unprepared for that.