European Council on Foreign Relations

Germany in Europe: the € matters in foreign policy

The success of the latest EU-summit tends to make us overlook that Europe is engaging into two changes of paradigms: we shift from a European Germany to a German Eurozone, and the deepening/widening-paradigm is broken. To cope with the first, Europe should urgently reinforce its communitarian institution, because Berlin cannot and should not become the new Brussels.

To cope with the second, we need to think urgently of a link between the EU 17 and the EU 27 other than the single market – and this is hard. Keeping Britain out of a decision-making 17 may not displease everybody on the European continent – especially given the recent discussions in the British parliament – but I feel worried for Poland, which has turned out to be a truly valuable European partner in many respects. The danger is that the rebalancing of the EU, with a strengthened EU 17, may involve losing a huge part of historical ‘Europe whole and free’.

Pushing some European countries to the outer circle will inevitably create its own dynamics over the years to come. The Eurozone must (and will) be institutionalized differently if it is to overcome the initial flaws of monetary union on the fiscal and political side (it is closer on this than before, but not yet there). This strengthening of the EU17 at the expense of the others might be justifiedif it saves the euro – which remains to be seen – and it may even make things easier for countries such as Ukraine and Turkey to join the EU itself (this would no longer harm deepening between others in the Union). The hope is that a more integrated Eurozone, moving closer to both fiscal and political union, will turn into a magnet, provided we keep the option of joining the euro open. However, joining is likely to become ever more difficult if the Eurozone deepens at a different tempo, and questions remain over whether this will lead to a 2-speed, 3-speed or multi-speed EU.

Europeis now in need of two narratives: one for the EU17, one for the EU27, plus a strong institutional bond between them. What we have lost most over the last month is the contextualisation of what we want Europe to be in the world in the first place. It is time – in both creditor and debtor countries – to reflect once again that the euro is not a goal in itself, but a tool for European politics worldwide and an instrument to defend European values in a globalised world.

We tend to overlook that foreign policy and the euro are more related than we often think: any efficient foreign policy needs strong economic and monetary backing, whether for (humanitarian) intervention, for the capacity to sanction effectively, or for the ability to act as a stabiliser in a region such as North Africa. Much of the US role in the world system over recent decades was linked to the role of the dollar in the international currency system and its place in the world economy. It will really matter if billions of Chinese dollars enter the Eurozone, as this paper from ECFR argued recently. Would this involve a loss of leverage for the EU27? Can we link the euro and conditionality-based politics?

The idea of a ‘single voice’ that increases Europe’s standing in a globalised world will suffer from the tensions involved in the EU17/27 question. Shaping common EU policies towards China, Russia or North Africa may become harder in the future than it already is. Where do we place CFSP in a future system? What will be the leverage of the whole EU system? Can a deeply integrated Eurozone afford to think differently about engaging in warfare (which costs a lot of money), as in Libya. Will the outer circle be forced to follow the EU17 in foreign policy matters?

The former narrative of Europe was linked to European values and how we want to bring them to the world: good governance, rule of law, human rights, multilateralism, climate protection, strong welfare states and solidarity. The European ‘value-set’ was the argument on which we based the need to stand together in a globalised world. The European Neighbourhood Policy review is informed by this. It is clearly important to fix the relationship between a more deeply integrated euro and a value based foreign policy soon.

The next challenge is then to embed the euro discussion in a wider political vision. A few proposals are already out there, for instance the suggestion of direct elections for the Commission president, or Jean-Claude Trichet‘s suggestion of  a ‘two-chamber solution’ to increase legitimacy. It will be interesting to see how these will be picked up and discussed. Should Europe face a recession, the current post-summit euphoria may vanish swiftly, and the pure euro-stability argument will not carry the case for Europe alone – not in Germany and not beyond. Both the EU17 and the EU27 need to see the bigger picture.

 

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