Germany and the Euro-Crisis

Germany and the Euro-Crisis

Taxpayers of the eurozone are now on the hook for the financial risks any EU member takes. That makes a coordinated economic policy imperative.


Translated by Ciaran Cronin (with acknowledgments to Eric Rosencrantz at


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.

The New Generation and the New Indifference

After the Holocaust, it took decades of concerted efforts—from Adenauer and Heinemann through Brandt and Helmut Schmidt to Weizsäcker and Kohl—to bring the Federal Republic back into the fold of civilized nations. A tactically astute Genscherism and an opportunistic orientation to the West were not enough. What was needed was an infinitely arduous change in mentality throughout the whole population. What ultimately won over our European neighbors were, first and foremost, the changed normative convictions and the liberal-minded attitudes of the younger generations who had grown up in the Federal Republic. And, of course, the fact that the convictions of the politicians active at that time could be relied upon played a decisive role in diplomatic relations.

The historically justified distrust of the Germans could not be weakened by their discernible interest in a peaceful European unification alone. West Germans seemed to have come to terms with the partition of the country, in any case. Mindful of their past nationalistic excesses, they could have no trouble in forgoing the recovery of sovereignty rights, in accepting their role as the largest net contributor to Europe and, if need be, in making concessions that paid off for the Federal Republic in any case. To be convincing, the German commitment had to be normatively anchored. Jean-Claude Juncker described the stress test well when, in view of Merkel’s cool interest calculation, he missed a willingness "to take domestic political risks for Europe."

The new German intransigence has deeper roots. In the wake of reunification, Germany’s perspective had already changed in an enlarged country preoccupied with its own problems. But there was a more sweeping change in mentalities after Helmut Kohl. With the exception of a too quickly exhausted Joschka Fischer, since Gerhard Schröder took office a normatively unambitious generation has been in power that has become preoccupied with a short-winded approach to the day-to-day problems of an increasingly complex society. Conscious of the diminishing room for political maneuver, these people shy away from farsighted goals and constructive political projects, let alone an undertaking like European unification.

The current German elites are enjoying the return to normality as a nation-state. Having reached the end of a "long path to the West," they are certified democrats and can once again be "just like the others." What has disappeared is the anxiousness of a people, who were also defeated morally and were compelled to engage in self-criticism, to find their bearings more rapidly in the postnational constellation. In a globalized world everyone has to learn to incorporate the perspectives of others into his or her own instead of withdrawing into an egocentric blend of aestheticization and utility-maximization. One political symptom of the dwindling willingness to learn are the Maastricht and Lisbon verdicts of the German Federal Constitutional Court, which cling to outmoded dogmatic legal conceptions of sovereignty. The solipsistic and normatively depleted mindset of this self-absorbed colossus in the middle of Europe can no longer even guarantee that the unstable status quo in the EU will be preserved.

The Blunted Sense of Crisis

In and of itself, a change in mentality is no cause for reproach; but the new indifference has implications for our political perceptions of the challenges ahead. Who is really willing to learn the lessons from the banking crisis so eloquently enshrined in the declarations of intent at the G-20 Summit in London more than a year ago—and to fight for them?

As regards taming a financial capitalism spinning out of control, there can be no doubt about the preferences of the majorities among the national populations. In the fall of 2008, for the first time in the history of capitalism, the backbone of the financial market–driven global economic system could be rescued from the brink of collapse only by the guarantees of the taxpayers. And the fact that capitalism is no longer able to reproduce itself under its own steam has now taken root in the consciousness of citizens who, as taxpayers, must bear liability for the "system failure."

The demands of the experts are on the table. Among the proposals under discussion are increasing the equity capital of the banks, greater transparency for the activities of hedge funds, improved oversight of stock markets and rating agencies, the prohibition of fanciful but economically destructive speculative instruments, a tax on financial transactions, a bank levy, the separation of investment from commercial banking and the preventive breakup of banking conglomerates that are "too big to fail." A certain nervousness was detectable in the face of Josef Ackermann, the shrewd head lobbyist of the banking industry, when television presenter Maybrit Illner invited him to choose between at least a selection of these legislative "instruments of torture."

I don’t mean to suggest that regulating financial markets would be straightforward. It certainly also requires the expertise of the cleverest bankers. But the good intentions are thwarted not so much by the "complexity of the markets" as by the timidity and lack of independence of the national governments. They are thwarted by the rash renunciation of any international cooperation aimed at constructing the political capacities for joint action that we lack—worldwide, in the European Union and, for a start, within the eurozone. When it comes to the bailout for Greece, currency dealers and speculators are more inclined to believe Ackermann’s shrewd defeatism than Merkel’s lukewarm consent to the euro rescue fund; realistically, they don’t think that the euro countries are capable of working together resolutely. How could it be otherwise in a club that squanders its energies in cockfights over appointments to its most influential posts—only to fill them with the most colorless figures?

In times of crisis even individuals can write history. Our lame political elites, who prefer to read the headlines in the tabloids, must not use as an excuse that the populations are the obstacle to a deeper European unification. For they know best that popular opinion established by opinion polls is not the same thing as the outcome of a public deliberative process leading to the formation of a democratic will. To date there has not been a single European election or referendum in any country that wasn’t ultimately about national issues and tickets. We are still waiting for a single political party to undertake a constructive campaign to inform public opinion, to say nothing of the blinkered nationalistic vision of the left (by which I do not just mean the German party The Left).

With a little political backbone, the crisis of the single currency can bring about what some once hoped for from a common European foreign policy, namely promoting a cross-border awareness of a shared European destiny.

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