The European Council on Foreign Relations

Germany in Europe: A European game change?

Date: 31st January 2012  |  Author: Ulrike Guérot,

Categories: Germany in Europe,
Tags: , eu, eurobonds, eurocrisis, france, germany , germany

It is not easy to detect where the euro debate stands after coming back from a holiday in India. In fact the euro crisis was hardly mentioned in the The Hindu, one of the most important Indian newspapers.

However, I think there is a tangible game change happening this year. Still, we are faced with many problems; in particular the details of how to restructure the Greek debt, how to help Portugal which will need some 16 bln euro, and how to make the ESM work. But there seems to be a new decisiveness in the air and political will is back, especially in Germany. The governing coalition found a common approach and shows the willingness to save the euro. A recent example is the speech of Guido Westerwelle in Washington, where he defended the euro and the European project as if his life depended on it.

In Davos, the likes of David Cameron, Timothy Geithner or Christine Lagarde criticized Merkel’s crisis strategy, in particular her focus on austerity and her refusal to increase the ESM beyond the 500 bln euro. Indeed, these are serious issues. However, the euro crisis seems to be under control - maybe more than ever before. There is a lot of political energy in the system to do the remaining bits and pieces, even from a US perspective.

More importantly perhaps: the rhetoric has changed. The EU Council this week focused on growth instead of austerity – and it is growth that is desperately needed in Europe. The questions for 2012 are therefore, whether Euroland is able and willing to address the trade imbalances, to get serious about symmetric adjustment and to conceive itself as one space for solidarity, growth and as one industrial value chain, in short: as one aggregated economy – and eventually use the EU budget to promote this in an efficient way. There is no point in Poland getting the lion share out of the cohesion funds when the Polish economy is performing quite well but Spain is struggling. (cohesion funds amount to 8.6 bln euro in Poland compared to Spain’s share of 5.7 bln euro). We also need to reassess why Greece is only 9^th (per capita) on the list of recipients – behind the Czech Republic, Slovenia or Slovakia. The only reason for this is that EU budget negotiations still follow national prerogatives, instead of pan-European thinking.

The question is now whether Germany is ready for a deeper integration of the European system - and if it is also willing to lead Europe on the matter. I happen find myself in agreement, astonishingly enough; with BILD am Sonntag: saving the euro will ultimately not be possible without at least some elements of fiscal federalism - and deeper fiscal integration is not possible without eventually designing the United States of Europe. I would prefer to call it ‘European Republic’, simply because Europe stands for the values of a republic but also because it seems less of an imitation of the US.

However, this Europe cannot come through the backdoor; it must finally embrace its citizens, as Jan Techau wrote in the last IP and in the sense of Habermas’ ideas on transnational democracy. It must come through the front door. In Germany, the famous historian Hermann August Winkler makes a very similar point. It would however involve developing a new German constitution according to Art. 146GG  as we need a European mutualization of debt. This is not conceivable in the existing framework of the German basic law (Grundgesetz).

Last week I listened to Herman van Rompuy at a conference in Brussels who once again called for a common debt guarantee if the conditions are right. Surprisingly, a prominent member of the CDU did not object. Surely, conditions include tough fiscal surveillance and a so called ‘golden rule’ that need to be implemented. But these conditions are above political: Eurobonds only work in a new democratic set-up in which the Commission would need to have the legitimate right to override national budget decisions - if it is necessary to stabilize the euro.

Those who think that this is revolutionary thinking shall be referred to the Delors-Report of 1988 which already included exactly the same ideas. Ultimately, common debt guarantees must result in joint decision making on expenditure. BILD argued last Sunday that nobody wants this and that nobody wants to spend political energy on such a federal European project, neither in Germany nor anywhere else. It is true that looking at Germany’s most important partner, France, one can indeed be frustrated and disillusioned about the capacity of the French political system to address the real questions about building a transnational European democracy – especially when it comes to structural implications for the V^th semi-presidential French Republic. It might well be that France turns into the belated nation in Europe - if the debate gains traction in Germany. Hence, it’s good news that Merkel will actively be involved in the French election campaign. What would be a better start for a new transnational democracy?

I am not naïve nor am I convinced that nobody is out there who thinks about these questions. There are in fact many prominent voices in the more Europe camp:  Guy Verhofstadt, Jean-Claude Juncker, Jean-Claude Trichet, the German Greens, Joschka Fischer as much as Jürgen Trittin, but also  Andrew Duff in the UK or Radek Sikorski in Poland. However, it may be overstating the point of course to argue that this is already the beginning of the European Republic.

Just before Christmas I went to Lille, where I talked to some 300 French students and literally none of them could imagine the split up of the euro. I hope that the normative power of facts eventually pushes the euro system to fiscal federalism. Politics has to follow, because we owe it to the next generation. Building a pan-European democracy is not easy, just think of the European democracy paradox or in fact of the importance of language (‘Toute est language’ as the famous French psychologist Francoise Dolto once said). However, starting this discussion would be the game change for 2012!

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