Germany has taken the UK’s place as a systematic opponent of reform of the European Union.
After World War II, Germany’s reconstruction was based on the principles of democracy, a social market economy, US security guarantees and the building of Europe. After the fall of the Berlin Wall, it recovered its unity and sovereignty, accepted the frontiers that were a legacy of 1945 and confirmed its investment in Europe by the creation of a single currency. When France fell behind, it took on the leading role and, under Angela Merkel’s leadership, led the handling of the euro zone crisis.
But history has moved on speedily and brutally, bringing about a new order of things. Brexit is a threat to building up a European community. The single market of 450 million consumers is becoming the adjustment variable in the US-China confrontation. Its production machine is having trouble adapting to the digital revolution and ecological transition. Populist movements are opposing its integration. And, finally, now that the US, through NATO, is no longer there as a guarantee of security, it has lost the means to combat the ambitions of the démocratures [démocrature: a combination of democracy and dictatorship] to gain power, or to combat the Jihadist fanaticism.
Never has it been more vital for the EU to face up to the “empires” and take on the challenges of the 21st century. But it needs a major overhaul if it is to survive, and this is being paralyzed by Germany, which has taken the UK’s place as a systematic opponent of reform of the European Union. It is in denial of changes that are taking place worldwide and this, together with the political decline of Angela Merkel, makes it the country that is saying no to Europe.
It is saying no to the re-stabilizing the economic policy of the euro zone, which is presently threatened by Japanese-style stag-deflation: its growth has fallen to 1.1% and inflation is at 1.2%. Germany itself could be on the point of recession following a fall in industrial production of more than 5% over one year and a fall in exports. It’s the ideal moment for Germany to punch up its budget. It has the means because of a budgetary surplus that has been built up since 2014 and public debt standing at 56% of GDP. And yet, Angela Merkel is clinging on the the dogma of Schwarze Null or zero deficit in spite of disastrous consequences. Firstly, the lack of budgetary support from the member states is forcing the ECB to try any means possible to energize activity, at the expense of negative interest rates that are destroying European finance. Secondly, German reserves, with a trade surplus at 7% of GDP, are not being invested in Europe but in US Treasury bonds. Berlin is taking over from Beijing as the main financier of the USA, even when the German automobile industry is being made a main target of Donald Trump’s trade war.
It is saying no to cleaning up the banks. Germany is in denial over the critical situation of its banking system, notably the gigantic Deutsche Bank hedge fund débâcle and the problems that riddle the affairs of the Sparkassen and Landesbanken. Instead of restructuring and recapitalizing them, as Spain and Italy are doing, its is pressurizing the European institutions to let them out of the common law framework covering accountancy and supervision. Thus, the German banks constitute a systemic risk for the euro zone, should any new financial crisis arise.
It is saying no to revising the rules governing the European single market and Europe’s energy strategy. Despite of the collapse of the European telecommunications industry – being left out of the digital world –, Germany remains divided over strategic intervention and how to revive European competitiveness. Above all, the energy strategy that Germany has imposed on the EU has made energy costs soar and has hindered any fall in emissions. By prioritizing an end to nuclear power, it has brought about a massive recourse to coal, meaning that it is by no means certain that the use of coal will end by 2038, and this compromises the 55% drop in emissions that is targeted for 2030. Furthermore, Germany’s desire to protect its automobile industry has paralyzed ecological transition in the transport sector.
It is saying no to any European policy on immigration. In 2015, Angela Merkel made a unilateral decision to disregard the Dublin regulation and the Schengen agreement, and then took the initiative of making an agreement with Turkey so as to block the influx of refugees. By stating that Germany needed 260,000 immigrants every year in order to stabilize its 82.3 million population, she has given credence to the absurd belief in the “great replacement” and has given a huge boost to the revival of the far right on the whole continent. She has also made the terrible move of handing Recep Tayyip Erdogan the means to indulge in blackmail, and he has no hesitation in using it: with 3 billion euros a year in his pocket, this year he has sent a new wave of immigrants to Greece, where 10,000 refugees landed in August.
It is saying no to making new investments in defense and security. In spite of a new rise in strategic risks, and whilst demanding a permanent seat on the UN Security Council – even sharing France’s seat – Germany refuses to bring its investment in defense up to par (currently at 1.22% of GDP). At the same time, it is blocking the emergence of any European defense industry by submitting arms exports and the quarterly release of finance for future fighter aircraft to the control of the Bundestag.
Angela Merkel, now looking pale and suffering from fits of trembling, is the symbol of a Germany that, in the face of changes worldwide, cannot move from the spot. And this immobility is a threat to Europe’s future. It is up to Ursula von der Leyen, who has come up through the ranks of the CDU and is the first woman to preside the European Commission, to get rid of the obstacle and create a new order within the European Union by overcoming Germany’s blockade. As always, there is a close link between the modernization of Europe and its member states. Any renewal of the EU depends on the creation of a new German model, which has been left legless in the face of de-globalization, just like France, whose model is fatally anchored in the statism and the closed economy of the Trente Glorieuses [the thirty years of economic boom between 1945 and 1975].
(Column published in Le Point, 19th September 2019)