Thursday, October 23, 2014
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Europe’s Winners and Losers

BERLIN – Rarely is a high-flying country brought back down to earth in a single night, but that is precisely what happened to Germany recently. In both football (soccer) and politics, the country had come to embody an unseemly mixture of arrogance and denial. It thought itself the measure of all things European, in terms of both the European championship and the European Union. In both cases, it was deceiving itself.

The same night that Germany was thrashed by the Italians in the championship’s semi-finals, German Chancellor Angela Merkel ran up against the limits of her own powers at the eurozone leaders’ summit in Brussels. Germany’s political course since the beginning of the euro crisis two years ago had left it isolated, and she was no match for an alliance of Italy, Spain, and France.

Indeed, she had no choice but to concede and agree to far-reaching changes to the EU’s new fiscal compact that will ease refinancing of the crisis countries and their banks. The German dogma of “no payments without counter-performance and control” was thus off the table, and the bargain struck in the early hours of the morning was exactly the opposite of what she had wanted. The fiscal compact had been reduced to a shambles even before Germany’s parliament, the Bundestag, approved it later that day.

In terms of addressing the eurozone financial crisis, however, the agreement reached in Brussels was anything but a breakthrough, because it never transcended the logic of narrow crisis management. It offers no strategy for overcoming the crisis in the south of Europe, which means that the threat to the eurozone has not been removed.

Politically, however, the agreement amounts to a small revolution, because it has shifted the balance of power within the eurozone: Germany is strong, but not strong enough to get away with isolating itself completely from Europe’s other major players. Decisions that go against Germany are possible.

There was patent gloating about the German defeat everywhere, only thinly disguised behind strained expressions of solidarity. The full extent of the political damage that Germany’s bailout policy for the eurozone, with its austerity, mass unemployment, and economic depression, has caused in southern Europe remains to be seen.

If Merkel had wanted the agreement reached in Brussels, the outcome would have marked the beginning of a fundamental revision of the eurozone’s crisis policy – and thus an expression of successful statesmanship. Instead, it is a full-blown defeat for Germany, linked to its firm denial that German policy has sharply reduced the country’s influence in the EU. Yet it clearly has: German influence within the European Central Bank has declined significantly; the German finance minister will not become head of the Eurogroup; and now we have the Brussels disaster!

But Germany’s defeat, however widely celebrated, holds much cause for concern. First, not everything that Germany is arguing is wrong: the urgent need for medium-term fiscal consolidation and structural reforms to increase the crisis countries’ competitiveness will not go away. Equally important, however, is the reduction of economic imbalances and European policy coordination to enable growth.

Second, political paranoia is rising on the German right: everybody supposedly just wants Germany’s money; our Anglo-Saxon partners' real aim is to weaken us; and the financial markets will not rest until Germany has invested all of its wealth and has thus endangered its economic success. Germany is being “betrayed to foreigners” by the opposition, and “good” productive capital is once again being opposed to “bad” speculative capital. In the opinion pages of some German newspapers, anti-capitalism is returning in a new form, which entails nothing less than a renunciation of Europe and even of the West.

Of course, while the German right threatens to become more nationalistic, history will not repeat itself, because today’s Germany has changed, and so has its political environment. Still, an increasingly Euro-skeptic Germany in the heart of the EU could, given its great economic clout, seriously endanger the European integration process. And, while that would jeopardize Germany’s own interests, practical political action is not always rational, particularly in times of serious crisis.

The same, incidentally, applies to France, except that the French, unlike the Germans, find it difficult to transfer political sovereignty, whereas for us Germans, it is all about the money. Both of these mental/political blocks are threatening the European project in equal measure.

Indeed, if the result of the recent summit means that France and Germany will henceforth each forge alliances against the other, while hiding behind verbal expressions of solidarity, we might just as well forget about Europe. Without a functioning Franco-German axis, the European project cannot succeed.

Both sides will have to decide whether or not they want Europe – that is, full economic and political integration. Economically, they must choose either joint liability and a transfer union or monetary re-nationalization. Politically, the choice is whether to empower a common government and parliament or return to full sovereignty. What we know for certain is that, just as one cannot be a little pregnant, the existing hybrid is not sustainable.

Last November, Volker Kauder, the majority leader in the Bundestag, bragged that “suddenly Europe is speaking German.” He was wrong. Just as Spain (not Germany) remains the benchmark in European football, so Europe speaks broken English at best. From the standpoint of safeguarding the European project, that is all for the better.

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  1. CommentedAnton Könen


    What kind of Europe are you talking about, Mr. Fischer? Reading your article i feel demoted to times in which Mao Zedong, Stalin or Honecker were preaching the amenities of communist system while people were starving do death or beeing hunted, arrested and even killed for their political conviction in China, UDSSR and DDR.

    Without any doubt, there are winner in your kind of Europe, but for sure, this is not the people you would propably call the mob. Siemens, Deutsche Bank, Goldman Sachs and other internationaly working companies do profit for sure from your Europe. Those do not have to be convinced from your system, they are already living it to the full.
    Why don´t you just explain them, the stupid mob, where they can find their personal advantages of your kind of Europe. Just tell millions of unemployed in Germany, Spain or Greece the advantage of being unemployed. Explain 600.000 people, most elderly, the advantage of being cut off from elelcrical power because the could not pay their bills. Explain the advantage of paying cash in advance for his medicine to a Greek invalid or even beter talk to a spanish youngster about the advantage of having no Job, no perspective in future, no thinking about an own familiy in own flats. An endless list of problems which obiously do not exist in your kind of Europe. Strange, that people do not like your Europe, isn´t it?

    Your Europe did have more than 10 years of time to proof that it works, and even better than other system. The result is desastrous. Horrendous national debts all over Europe, highest unemployment rate since 15 years. Political and social disruption as we did not see after WWII. No ideas from policy but never ending and consistently louder nascent cry for more money, common accountability for debts which appears to be more and more helpless. What kind of bold froud that is! Not even 1 single job has been created with, in the meantime more than 2000 Billion Euros, freshly printed. This money has just been used to clear manipulated balances of ailing Banks. 200 Billion for a sick Hypo Real Estate, 80 Billion for spanish Bancia s.o. Those measures are not only of no use, they are cynical. Supporting „Systemic Institutions“ is the official term. What kind of systems do we want to support, those which creat mass uneployment and social pauperisation.
    As other dogmatists before, you forgotl the people, who have to fill political systems,however natured, with life. You don´t explain or discuss, you only claim political statements while ignoring reality in the most arrogant mannor.

    Nowadays europe´s nations are more hostile to each other than ever before. Why don´t you just explain nationals from Germany or France, why they have to account for the missmanagement of Spanish or Greek Banks, well considering that the general public of those countries do not have anything to do with that. Generally this seems to be the core problem in your personal european ideology-people have been degraded to functional units, their rights to live has been reduced to just participating in your political map exercise.
    The kind of politician you are,frequently make me frigthen of an upcoming war. The ideological, nearly dictatorial way how eligible fears and sorrows of people are being ignored is provoking instead of unifying. Functionaries of economy and policy are obviously not capable to learn even from the near history. I am afraid, Mr. Fischer, your „Economic Europe“ is already lying in a kind of politic palliative care unit, no hope anymore. You just forgot the people.

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