30 January 2012

FT: The dilemma of German leadership

Late last year, at the height of Europe's sovereign debt crisis, the Polish foreign minister asked for more German leadership in Europe. Nobody with a sense of history could miss the poignancy of his appeal. "I fear German power less than its inactivity", said Radoslaw Sikorski.

At the Brussels summit, Chancellor Angela Merkel secured her crowning triumph: a new fiscal compact agreed by 26 members to enforce German-style budget discipline throughout the eurozone. Yet German leadership comes at a price. The risk is that Berlin’s leadership will, willy-nilly, feed perceptions of German dominance.

The latest spark to anti-German tinders is a Berlin policy document, which contemplates giving an EU commissioner the authority to overrule Athens’ taxation and public spending decisions. It is far from clear that this would differ much from the power that Greece’s official creditor “troika” already enjoys. Moreover, the shortcomings of the Greek rescue programme owe less to the wrong decisions being made at the top than to an inability to have those decisions implemented by Greece’s dysfunctional bureaucracy. Those same bureaucrats would hardly be more eager to follow through on orders from Brussels than Athens.

There is no reason to distrust the motives for Germany’s eurozone policies. They are partly a function of domestic politics, as in every country, and partly flow from the German diagnosis of the problem and the best solutions.

For better or worse, many Germans feel they were duped into supporting the euro, partly as the price for German unification within a unified Europe. They have justifiable pride in the success of Germany’s own economic policy over the past two decades, first in absorbing the East German wreck and later restoring the whole country’s competitiveness through far-reaching labour market reforms. Talk of Germany being the “sick man of Europe” has long since disappeared. Now German politicians insist on similar sacrifices from their fellow eurozone members. This may be a handy negotiating tool for Ms Merkel, but the sentiment is heartfelt none the same.

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