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2013 CAEF Public Meeting 27 April 2013

Germany's Role in the EU

Speech by Horst Teubert of German Foreign Policy Group

Germany's Role in the EU It was just two years ago, at the beginning of 2011, when the most prestigious and most influential German foreign policy magazine, the Internationale Politik, proclaimed German Chancellor Angela Merkel to be the first "EU chancellor".

The magazine did this after a year of heated debate in the EU. By 2010, the German government had succeeded in imposing a severe austerity policy on the member states. There had been fierce discussions on how to solve the euro crisis. Many EU countries, amongst them France, had strongly opposed the German plans to deal with the crisis by reducing public spending and cutting wages but finally, they had to give in to Berlin. The magazine Internationale Politik stated plainly: "A structural question of the European Union was clarified in 2010: ... Germany, with the largest national economy, has definitively emerged as the central player in the Union. To put it bluntly: Merkel is ... no longer just Germany's chancellor, but the European Union's as well." Some in the EU "might grumble about Germany's conditions for its euro aid, but in fact Merkel has been granted a kind of 'agenda setting authority' within the circle of 27 state and government leaders."

Triumphant, the author went on. If Merkel was the EU chancellor, then "Who is Who in the EU Government?" he asked. "It is both interesting and provocative to assign other players a role in this picture of an 'EU government.' The individual state and government leaders could be comparable to a squad of ministers ... . The role of vice chancellor certainly falls to French President Sarkozy, who has the leeway to take the initiative in a policy debate but could be roped in by the chancellor, Merkel, should they disagree. ... EU Council president Herman Van Rompuy acted similarly to the Head of the Chancellery." As such, Van Rompuy "represents the interests of the dominant political groups and has to search for an agreement between the different camps - while also facing the risk that the head of government and her deputy could quickly overrule him." According to Internationale Politik, there can be no doubt who really is in power in the EU. The magazine is published by the German Council on Foreign Relations, Berlin's leading foreign policy think tank which is close to the government. The author of the article who proclaimed Merkel to be the "EU chancellor", Andreas Rinke, works as chief correspondent of Reuters News Agency in the German capital. He is quite familiar with the atmosphere in German government circles. In addition, whereas his article about the alleged "EU chancellor" is exceptionally frank, its central idea is not exceptional in the German political debate.

You can hear allusions to German dominance over the EU time and again in speeches made by German politicians. Volker Kauder, Chairman of the Christian Democrat's parliamentary group in the German Bundestag, summarized the development of the EU in November 2011 by declaring: "Now Europe is speaking German." You can read similar commentaries in influential German newspapers where German "leadership" in the EU is not an uncommon topic. Last but not least German dominance can be observed in practice.

Examples for this were the elections held in Italy in February 2013. They were seen as very important by Berlin because there is strong resistance to German austerity policy in Italy on the right - organized around Berlusconi - as well as on the left and in the new eurosceptic Five Star Movement of Beppe Grillo. In 2012, the German Social Democratic Party had discussed things with the Italian social democrat Pier Luigi Bersani and made sure that he stayed loyal to the German austerity policy. As a consequence, German social democrats meddled with power within the Italian electoral campaign, backing Bersani. Even the German Foreign Minister declared - indirectly but unmistakably - that eurosceptics should not be elected. Immediately after the elections the Italian president travelled to Berlin to discuss the outcome and the way in which it should be handled with the German government. When he was in the German capital the candidate for chancellorship of the social democrats, Peer Steinbrück, called the two winners of the Italian elections, Berlusconi and Grillo, "clowns" - a clear sign how arrogantly Italy and its electorate is dealt with in Berlin.

German dominance over the EU has been a general topic among the German elites since 2011. Still today, it is worthwhile to look back into the development of the EU in 2010 and to examine how the German government fought its way to become the de facto leader of the Union. One of the most important aspects was Germany's victory over France in the question of how to handle the euro crisis. The German government succeeded in imposing its austerity policy on the EU against resistance from France and other member states because it had - in addition to its political power - important economic advantages. These had a lot to do with inner developments in Germany during the decade before.

In fact, the German coalition government of the Social Democrats and the Green Party which was in office from 1998 to 2005 had imposed a severe austerity policy on Germany. Chancellor Gerhard Schröder argued that German companies could in the future not compete anymore with their rivals on the world markets if far-reaching measures to make German products cheaper were not taken. Schröder indeed took such measures which in Germany until today are known as "Hartz reforms", named after Peter Hartz, a former Volkswagen manager who had designed them. Real wages were cut, social welfare was reduced drastically - with considerable success: According to a study published by the OECD, between 2000 and 2005, poverty in Germany rose faster than in any other western country. When the Schröder government was voted out of office in 2005, poverty in Germany lay for the first time above the OECD average.

At the same time, due to shrinking wages and social cuts, German companies indeed were able to produce cheaper goods and to sell more and more products on the world markets. German exports boomed, guaranteeing the country to remain the "exports' world champion" until 2009 when Chinese exports finally overtook the German ones. In Germany, even today many people are proud of the export strength of the country because it gives Berlin strong power in the world; mostly it is overlooked that it is only the ruling class which is profiting. But the so called export strength has some quite far reaching consequences. One of them is that workers will always be demanded to renounce higher wages - these could make products more expensive and lead to losses on the world markets. It's a vicious circle. Another consequence is that making one's money from exports means that one's profits come from abroad. In the case of an "exports' world champion", the result might be dangerous.

Why? Take, for example, the relationship between Germany and France. During the decade before 2010, France did not adjust to the German austerity policy named after Volkswagen manager Hartz. So, as Jacques-Pierre Gougeon, an expert of the Paris based "Institut de relations internationales et stratégiques", stated in April 2010 in the influential newspaper Le Monde, the cost of labour had risen in France from 2000 to 2009 by about 17 percent. He could also have said: Workers were being paid better than before. In Germany, the cost of labour had been reduced in the same time by about 1.3 percent, leading to rising poverty. Jacques-Pierre Gougeon analyzed some more statistics and stated that, in 1999, France had an export surplus of 39 billion euro. But in 2009, things had changed decisively: Now, the country had an export deficit of 43 billion euro. One important reason was that Germany - pushed by austerity measures - had increased its exports not only generally - to the damage of competing French exporters - but also its specific exports to France. The latter meant that France was paying more and more money to buy German products, at the same time earning less money from selling French products to Germany.

This has gone on until today. Last year, German exports to France rose to 104.5 billion euro, whereas French exports to Germany only reached 64.8 billion euro - a difference of about 40 billion euro. This means: In the end, France paid 40 billion euro net to Germany alone in 2012. If a country pays huge sums to another country year by year, it is obvious that it will run into heavy debts. This was the case not only with France, but with other Member States of the euro zone as well. Why with euro zone countries? The reason is simple: A country which has its own currency can protect itself against overwhelming exports from austerity countries by devaluating, be it the Drachme, the Lira or the Franc. The euro zone countries no longer have this possibility. They have no means anymore by which to defend themselves against the ever stronger German economy, and so, they run ever deeper into debt.

How can this dilemma be solved? The German plan is simple. Germany wants to compete on the world markets at any price because economic strength helps to become more powerful. For this reason, the government insists on its austerity policy - and forces the other countries to follow the German model, even if these measures cause poverty to rise sharply especially in Southern Europe. Some experts already described this years ago. For Germany, the exports to the world markets were by far the most important thing, stated Paris based expert Jacques-Pierre Gougeon in 2010; one could, he wrote, hear members of the German establishment demanding austerity policy for the sake of German exports and at the same time saying: "Europe is becoming poor? So what?" Paris, losing economic influence to Berlin, tried to slow down the austerity measures - but as the French elites realized, it was impossible. In October 2011, one could read in the economic newspaper Les Echos: "Germany got the upper hand over France because our country is economically weaker." Just a few days before, the German parliamentarian Volker Kauder had triumphed: "Now Europe is speaking German."

Since the German government succeeded in imposing its austerity measures on the EU, more and more countries have fallen into crisis. The reason is simple: Cutting wages and social welfare so heavily is bound to strangle the inland markets. Amongst other aspects, the amount of taxes paid to the state shrinks. This was the case for example in Greece, leading to the government not being able to pay its debt. In fact, public debt in Greece, far from shrinking, went to new heights, prompting the German government to demand new cuts - a vicious circle. Indeed, several southern European countries are deeply stuck in such a deadly recessionary spiral.

These economic terms correspond to brutal facts in social life. Unemployment in Greece rose to 27.2 percent in April 2013, youth unemployment having reached more than 50 percent. The average income has shrunk by 22 percent since 2009; but because prices have risen significantly in the same period, real wages have gone down by a third. 250 000 people in Greece have to eat at soup kitchens. Other countries are heavily affected, too. In Spain, unemployment has risen to over 25 percent. In Italy, there is a dramatic increase in suicides because more and more people feel that they don't have any prospects for the future. According to the Catholic welfare organization Caritas, about 30 percent of all children in Greece, Portugal, Spain, Italy and Ireland live near the poverty line.

This economic devastation is accompanied by a kind of cultural "Germanization". In 2008, the Frankfurter Allgemeine Zeitung, one of the most influential German newspapers, stated that the Schröder government had only been able to impose the "Hartz reforms" in Germany because the trade unions didn't really oppose them. By demanding only minimal wage increases, they had made a contribution to strengthening the German export economy, the conservative newspaper praised them in April 2012: "Instead of ideologists eager to strike, there are even more co-managers in the leading circles of the trade union head offices and in the works councils." Knowing full well that, for example, in France, Italy or Greece workers are used to fighting for their rights with much more determination, the Frankfurter Allgemeine Zeitung already had declared in March 2012, "the south" would have to adjust its "political-economic culture;" France, Italy, Greece and other countries indeed needed a "cultural revolution" to adopt the austerity-compatible German model.

Some in the German establishment are warning that the German domination might provoke serious resistance. In June 2012, an analysis was published with the collaboration of a German government advisor which dealt with the question of how Germany was seen in other EU member states. The authors came to the conclusion that Berlin must handle "the sensitiveness of the other EU countries more carefully" to keep them loyal. In mid April, the German foreign minister uttered that the "centrifugal forces in Europe" had "never been as strong" as today. In the future, this required more circumspection.

In the summer of 2012, also former EU Commissioner António Vitorino had warned against open German domination in the EU. Vitorino recalled that during his term as EU Commissioner from 1999 to 2004, he had experienced "a kind of normalization" of Germany: German chancellor Schröder had strongly emphasized German interests - "the 'German power' was back." Vitorino recalled as well that Germany succeeded in forcing the other EU member states to concede that there are more Germans in the European Parliament than delegates from any other European country. Germany had dominated the debate over the EU budget covering the years from 2007 to 2014, reminded Vitorino; Germany had also played a crucial role in the enlargement of the EU which anyway corresponded especially to German interests. No one in Europe would doubt, he uttered, that the current austerity measures could be seen as a new element of German domination in the Union.

In 2012, there were mass protests in Greece and in Portugal when German chancellor Merkel went there. She was confronted with slogans like "Merkel out" which shows that people realize who is in power in the EU - and that people also realize which state forces the others to put in operation fatal austerity measures. In March 2013, the International Labour Organization (ILO) published the results of new analyses about the crisis and warned: "In all the crisis-hit countries high joblessness coupled with mounting job insecurity and wage and social benefit cuts imposed by austerity measures have raised people's perception of injustice and fuelled both peaceful demonstrations and less peaceful outbreaks of social unrest. Under such circumstances, contagion effects in other European countries are merely a matter of time." According to the ILO, the probability of new social unrest in the EU has risen significantly. As the protests in Greece and Portugal show, one must take into account that social unrest in the EU is directed more and more towards the dominating power in the EU - Germany.

Horst Teubert is a journalist in the German Foreign Policy group
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