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A German Pact for Europe

A German Pact for EuropeYet another euro crisis summit is over, and yet another deal has been struck. This time, the deal has taken the shape of an intergovernmental agreement. If I am not mistaken, and I may very well have lost count by now, that makes nine summits and five deals in the past 19 months. Although it is uncertain whether this most recent of deals will keep the wolves at bay, we can at least say that the contours of the future Europe now appear more clearly.

A striking feature of the Europe of tomorrow is its strong German influence. In this respect, it must be noted that the Germany of today is somewhat different than the Germany of five years ago. In the Germany of yesterday, European integration was by definition considered in Germany’s interest, even when this meant setting aside national interest in a more narrow sense. In respect to EU policy, this often entailed seeking consensus at all cost and bowing to the lowest common denominator.

Germany is now starting to act like a normal nation with interests to protect, and is no longer terribly interested in consensus. Berlin will certainly still push for integration, but the type of integration is one where the German vision of prudent economy prevails, and where consensus is not necessary.

The refusal at the December 9th summit to grant Britain concessions in return for agreeing to a treaty change marked an “enough is enough” moment for the Germans. The way around the British veto – to go ahead with an intergovernmental pact outside of the EU framework – marked a change in the way Europe will do business in the future. Seemingly, we will see more intergovernmental solutions in the future. In this type of scenario, large countries will take the lead, while small countries likely will be presented with some difficult my-way-or-the-highway choices.

From a right-wing/left-wing perspective, the influence of the Merkel government is demonstrated in the way in which the eurozone (plus) plans to ride out the storm. The preferred economic theories of the right-wing, those of Friedman and Hayek, play a central role. Fiscal constraint coupled with anti-inflationary monetary policies is the way forward – say the Germans. The intention is to hardwire these ideas, through constitutionally set deficit limits, into EU member state governments. Poor Keynes would roll in his grave.

The point must be made that Europe by-and-large is ruled by center-right governments who have an ideological penchant for the German solution. This has made Merkel’s preferences more easily acceptable. However, after a period of initial acceptance of the fiscal pact, governments outside the eurozone now seem to be adopting a more critical attitude. In particular, it will be interesting to see how the Danish center-left government handles its upcoming EU presidency. Naturally, the presidency will be defined by the fiscal pact, and already the government is facing demands of a referendum from both the left and right.

But regardless of views on budget deficits, in general, outside of Germany, both left and right-wing would like to see the ECB break out the big guns. That this has not happened has much to do with the German belief in the independence of central banks. Not withstanding the pros and cons of a rescue plan inspired by Austrian economics, most would say the current rescue plan is long term, while Europe needs to be rescued in the short term. That Germany has withstood the calls for the ECB to change its policy says volumes about who is in charge in Europe. No matter the effectiveness of the fiscal pact, one thing seems certain: The Europe of tomorrow is acquiring a distinctly German flavor.

 

Author

Finn Maigaard

Finn Maigaard holds an MA in history from the University of Copenhagen. As an MA student Finn focused on diplomatic history culminating in a thesis on US-Danish security cooperation in the Cold War. Finn also interned at the Hudson Institute's Political-Military Center, where he concentrated on the EU's role as a security institution, and at the World Affairs Institute as a Communications/Editorial Research Assistant. Finn currently resides in Washington, DC and works as a freelance writer, and as Program Coordinator at the University of Maryland's National Foreign Language Center.