09 February 2012

John Wyles: Living in a German Europe

German Chancellor Angela Merkel's implacably determined and successful drive for iron-clad fiscal discipline as the solution to the sovereign-debt crisis appears to confirm that we now live in a German Europe, writes Wyles for European Voice.

The new German European policy goes with the grain of domestic public opinion. Polls say a majority remains favourable to the EU but strong support for a faster pace of integration has melted away. These days, populist German newspapers are mining the same vein of rebuke and ridicule as their British cousins, highlighting Brussels bureaucracy and its interference in hallowed sectors of national life.

How ironic, then, that the current crisis is requiring Merkel to point Germany and the EU in the direction of deeper political integration when voter interest in the destination is shrinking. Though some investment bankers and market analysts have yet to be convinced, Berlin is carving into stone its consuming priority to save and sustain the euro as a long-lasting currency. If this ultimately requires a fiscal union, changed political institutions and more powerful European leadership, then Berlin is committing itself to transporting the eurozone into that new world.

A crucial weakness in Merkel's approach so far has been her apparent inability to make a case for integration on any other grounds than the euro's need for more secure political foundations. Driving fiscal orthodoxy from Brussels may guarantee a more stable future for the single currency, but by itself it does not begin to answer the question ‘what is Europe for?' She has been herding the eurozone countries and at least eight others like sheep into a pen without any vision of what they should do when they are locked inside. Indefinite austerity is not a great incentive.

But this most pragmatic and flexible of politicians is no visionary. She learns by doing and she does one step at a time. With the fiscal treaty setting tight limits on debt and budget deficits awaiting formal adoption in March, Merkel at last appears to be heeding warning voices, not least that of Nicolas Sakozy, France's president, that there will be no exit from the sovereign-debt crisis without faster economic growth in the Union's insolvent periphery. Consequently, policies for promoting growth were the leitmotif of last week's informal European Council (30 January).

Borrowing from much recent expert analysis, Merkel is also acknowledging that alongside the debt crisis, the eurozone has a competitiveness problem. She did so in a speech in Beijing last week and argued that political union was needed to deal with the challenges of budgetary discipline, growth and job creation. “The EU will therefore need to become a closer union over the coming years”, she said.

One wonders whether she can carry the German constitutional court, her fellow Germans and an enlarged eurozone into closer union when, at best, current political preferences are anchored in the status quo. The EU's treaties are going to have to be rewritten yet again. But 20 years after the Treaty of Maastricht came into being, political union is back on the European agenda. For the time being, Merkel may control Germany, but can Germany control the construction of a new Europe?

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