Germany offers vision of federalism for the European Union

Thomas Peter/Reuters - German Chancellor Angela Merkel delivers a government policy statement at the lower house of parliament, the Bundestag on in Berlin June 27, 2012.

BRUSSELS — Political posters in Rome are comparing her to Hitler. A popular British magazine dubbed her “Europe’s most dangerous leader.” But could German Chancellor Angela Merkel — the frugal physicist foisting tough austerity on the region’s hard-hit economies — really be the most pro-European leader in Europe?

Merkel arrives here Thursday for a European Union summit, with the stoic 57-year-old raised in East Germany again seen as the chief stumbling block to a shock-and-awe response to the region’s debt crisis. Jealously guarding the purse strings of Germany — an anchor of economic might and stability in a region adrift in financial trouble — the leader nicknamed “Frau Nein” by the European press is resisting calls to roll out a bevy of measures seen as possible quick fixes to the crisis.

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But especially in recent weeks, Merkel and her top ministers have been spelling out a far grander, German alternative to convince markets the euro is here to stay. What they envision would mark a radical step forward in European integration through a “political union” in which countries in the region would act more like American states, sharing an elected president and even a pan-European army.

Such visions are hardly new, but the Germans are nevertheless building a fresh case that integration is the only way to shore up the foundations of the euro, albeit one that could take years, if not generations, to see through. Part of the summit here will be dedicated to debating the first steps of such a path, including the creation of a regional banking supervisor that, in about a year, would have the power to do something long considered taboo in the fiercely independent nations of the euro zone: override the authority of national governments.

Plans also being discussed call for the establishment of a sort of European Treasury down the line, vesting central authorities with broad powers over national budgets. Yet for many in Europe, the holdout by Germany for a grander plan is being seen as suspicious and highly damaging.

In a more deeply integrated Europe, Berlin could emerge as the most powerful single voice, particularly sending chills down the spines of the French. At the same time, critics charge that Merkel’s call for a bigger — and slower — solution is simply a cover for German unwillingness to take costly and critical stopgap measures. They warn that there could be no euro zone left to integrate if the region acts on Berlin’s timetable.

The German leader’s tough talk has not helped her case. Merkel told the German Parliament on Wednesday that collective debt for Europe — seen by many economists as a vital weapon against the crisis — is “economically wrong and counterproductive.”

“There are no quick or easy solutions,” she said. “There is no magic formula, no coup, by which the debt crisis can be overcome once and for all.”

Ratcheting up the pressure on Merkel to give in and back emergency measures to bring down the soaring borrowing costs for troubled euro-zone countries, the leaders of Spain and Italy have issued thinly veiled messages to the Germans suggesting that time is running out.

“There are many institutions and financial entities that have no market access,” Spanish Prime Minister Mariano Rajoy warned Wednesday. He said Spain was losing the ability to refinance government operations on open markets and called for “urgent” action. “It is happening in Spain,” he said. “It is happening in Italy and in other countries. This is a crucial issue.”

But the Germans are digging in their heels, dismissing the charges emanating from corners of Europe that Berlin is trying to orchestrate a new model for the continent in which it is the one largely calling the shots. “Maybe the fears of other nations in Europe are related to World War II and history,” said Sebastian Dullien, senior policy fellow at the European Council on Foreign Relations in Berlin. “But it could also be they are simply afraid of losing power.”

The Germans have yet to fully spell out what they mean by a political union, but it largely involves the surrendering of more national authority to the region’s administrative capital in Brussels. Merkel’s influential finance minister, Wolfgang Schaeuble , last week re­inforced calls for a directly elected president of the European Commission, as well as a new finance minister for Europe capable of overruling national governments. German Foreign Minister Guido Westerwelle called a forum of his peers together last week to float notions including the integration of European defense into a single, standing army.

“Only a long-term perspective for Europe will restore the confidence that we also need to come out of the debt crisis now,” Westerwelle told the Financial Times.

But to a large measure, countries such as France, the Netherlands, Italy and Spain see the surrendering of power to a central authority as living under a German diktat by a different name. If, for instance, the region ever embraces a parliament or president elected by proportional representation, Germany could, by nature of its size, have the biggest say.

In the Netherlands, for instance, a poll this month by Maurice de Hond found that 64 percent of those asked were opposed to Merkel’s calls for a political union. In Paris, where Merkel was meeting Wednesday evening with France’s new president, Francois Hollande, there is still strong skepticism of ceding national powers. Hollande, a socialist, has warned Merkel that a quid pro quo would be required, balancing steps toward integration with more willingness from Germany to put cash on the table.

“Integration as much as necessary, solidarity as much as possible,” Hollande said Wednesday night in Paris in a joint news conference with Merkel.

Increasingly isolated and under pressure from other leaders, Merkel has held firm to her line on short-term fixes to the crisis: Countries that overspent and over­borrowed must now endure lean times. The chancellor is set to agree this week to only a modest new growth plan pumping a relatively small amount of new cash into Europe’s moribund economy.

But that position is also based partly on a deep sense in Germany that the 21 / 2-year debt crisis is simply not as bad as the rest of Europe thinks it is. If the situation takes a sharp turn for the worse — say, if Italy spirals into a deeper crisis — many think the Germans will feel boxed into a corner and will ultimately accede to more and quicker concessions on short-term measures.

“I have some sympathy for the German position,” said Karel Lannoo, head of the Center for European Policy Studies in Brussels. “Angela Merkel is being forced to sell bailouts to her own population that has lived within its means. We have to be careful in Europe not to alienate the German public, because Europe really needs Germany now.”

Birnbaum reported from Washington. Staff writer Edward Cody in Paris contributed to this report.

 
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