After World War II, West Germany wanted nothing more than to shed its pariah status. Followership, not leadership, earned it the respect it coveted. For years, West Germany was an invisible and reliable partner; it simply managed challenges or contributed to collective action. Leading the charge on large-scale solutions for international problems was a concept that died on the battlefields of the war. Continental or global leadership is nothing that postwar Germans have ever learned, aspired to or exercised.
Germany’s reunification changed the equation — a fact becoming apparent two decades later. When Russia and later the United States largely disengaged from the continent, they left a void, just as Germany was transforming itself from “the sick man of Europe” into “Europe’s powerhouse.” A combination of entrepreneurial spirit, shrewd business strategies and economic reforms fueled the comeback. Today, Germany’s population and economy are about a third larger than France’s, Europe’s second power. This success has triggered the calls for Germany to become the continent’s white knight in the midst of crisis.
But the Germans have discovered a contradiction: Europeans may call for German leadership, but they don’t want to be led by Germany. And they certainly don’t like the results of German leadership. When a European Union task force, led by a German, traveled to Athens in October to offer technical assistance with economic reforms, some disgruntled Greeks soon called its members “the Gauleiters,” the term for Nazi-era regional government representatives.
In Ireland and Portugal, the public is torn over whether to regard German help as a modern Marshall Plan or a Versailles Treaty without the war. Such reactions have certainly not been an incentive for Germany to provide even more help.
If the euro fails, it will be seen as Germany’s fault, not Greece’s or even Italy’s. To avoid the blame as well as the economic fallout, Berlin has little time left to act. The European summit set for Thursday and Friday is a golden opportunity — perhaps the last one. The question that only Germany can answer is this: Does it really want to assume significant responsibility for the euro zone’s debt, thus taking on enormous risk but also making itself a hegemon? Right now, it certainly looks like a reluctant hegemon, one that is in over its head.
The revolutions of 1989 shifted the power distribution in Europe, and they changed Germany’s relationship with its neighbors in a way that endures today. Reunification had always been the German national goal, and it was achievable only in a unifying Europe. Therefore, the nation’s commitment to further European integration was never as enlightened as it appeared. At least partially, it was a means to a national end. Once Germany’s reunification was achieved, the old motivation for supporting a unified Europe disappeared.
Instinctively, Germans understood the deal that Chancellor Helmut Kohl struck with French President Francois Mitterand at the time: France consented to German reunification, and Germany gave up the cherished deutsche mark in favor of the euro. Regaining territorial and political sovereignty meant giving up monetary sovereignty. The French calculus was to use the euro to tie a larger Germany to Europe. And that has worked — until now.
From the outset, the German people had reservations about the euro. When the common currency was introduced, polls found that majorities did not support it. But Kohl, as the “father of unification,” reassured his countrymen. It is no coincidence that the very same Kohl, now an ailing elder statesman, warned Germans this past week that the risks of stepping in to resolve the crisis are smaller than those of a collapsing euro system. However, large majorities of Germans now oppose some of the proposals for dealing with the crisis. They fear they will be forever bailing out Greece and Italy and the rest.
The deutsche mark was the tool Germany used to inoculate itself from the malaise of those countries. The currency embodied the country’s postwar reemergence as a symbol of stability and success. In fact, it was the only national symbol in which Germans dared take pride. When West Germany won the soccer World Cup in 1954, for instance, nobody sang the anthem, hardly anybody waved the flag. The deutsche mark became the last redoubt of German nationalism — a nationalism that outlived the currency itself. Economic nationalists are at the core of the current German opposition to the joint underwriting of European debt. While Chancellor Angela Merkel calls for “more Europe” to end the crisis, the economic nationalists see further transfer of sovereignty as a cardinal sin.
Yet the debate in Germany does not feature the word “nationalism.” Instead, the argument is presented as one of economic principle. The dominant school of economic thought in Germany holds that the state must establish a proper legal framework for the economy. It creates order by setting rules about how market forces ought to work — and then sticking to them. The central bank’s mission should be confined to fighting inflation, thus avoiding the politicization of the institution.
On German insistence, the framework for Europe’s Economic and Monetary Union was modeled on these principles. Each member state would comply with rules on debt and deficits. Moral hazard should be avoided at all cost. A debt crisis, in the minds of Germany’s mainstream economists, is therefore best addressed by rooting out the underlying problem. A state should engage in structural reforms and reduce its deficit through spending cuts and tax increases, a combination of liberalization and austerity.
While that may be a long-term cure, the German medicine has done little so far to remedy the acute condition — the collapse of confidence in the euro. Germany’s crisis response has always been a day late and a euro short. Now the country faces a stark choice: abandon economic orthodoxy and the remnants of national sovereignty or face the breakup of the euro, which would set off a chain reaction of defaults and depression, disintegration and decline.
In this most dramatic of situations, the contours of a deal finally seem to be emerging in Berlin and elsewhere in Europe. Merkel will get the limited changes to the European Treaties that she wants, to complement the monetary union with a true fiscal union. In return, Germany will acquiesce to a much larger role for the European Central Bank in resolving the crisis, allowing for what Berlin hates most: a central bank that prints money until the long-term reforms show results.
For this transgression, it’s unclear what type of revolt Merkel might face in her administration, in her party, in her coalition and among her voters. Whether a German leader can survive if Germany leads Europe is another story.
Thomas Kleine-Brockhoff is senior transatlantic fellow at the German Marshall Fund of the United States, where he leads the EuroFuture Project.
Read more from Outlook:
Modern Greece’s real problem? Ancient Greece.
A world without the euro
Friend us on Facebook and follow us on Twitter.