Abstract
This working paper attempts to understand why after decades proposing the creation of a political union to make European Monetary Union (EMU) sustainable, Germany has not used the window of opportunity offered by the Eurozone crisis to pursue this goal more vigorously. By employing the conceptual devices of the nature of money and hegemony, the paper explores three possible explanations: (1) Germany is slowly becoming a ‘normal’ European power and has started to favour the intergovernmental over the community method; (2) the German public has lost its enthusiasm for European integration, especially after realising how the proposed banking union has brought the spectre of a ‘transfer union’ closer; and (3) Germany remains a reluctant hegemon and once it has seen that France is still not ready for political union it has refrained from actively promoting this ideal. The paper’s conclusion is that the first two explanations have some merits but that the third continues to be the most convincing. The zeal with which the German political elites, supported by their public opinion, have pushed through the Spitzenkandidaten logic in the 2014 European elections confirms that Berlin is still determined to build a more federal Europe. Rather, the question is whether Paris is ready to take part in such an endeavour.
Introduction
Germany plays a fundamental role in the European continent’s economic and political stability. This has been the case for centuries. Since the mid-15th century the territories that lay in what is today the Federal Republic of Germany have been crucial in determining the balance of power in Europe. Regardless of whether what are under analysis are the attempts of Charles V and Philip II of Spain to create a Universal Monarchy, the caliphate of Suleiman the Magnificent and his successors’ desires to dominate Europe, Napoleon’s ambition to establish a continental bloc, the Mitteleuropa of Imperial Germany, Hitler’s Third Reich, the socialist utopia of the Soviet Union or –more recently– the construction of NATO and the EU, ‘in each case the central area of contention was Germany: because of its strategic position at the heart of Europe [and] because of its immense economic and military potential’ (Simms, 2013, p. 530). The importance of the German territories for the maintenance of the balance of power in Europe has been a preoccupation for British rulers since Henry VIII. For centuries London has opposed any attempt by imperial Spain and France to control the region, and later, when Germany united, it fought two world wars to prevent German domination of the Continent. The obsession of David Cameron, Britain’s current Prime Minister, of fighting anything that might hint at German-led euro-federalism continues this tradition.
This is striking because after WWII, London seemed to have found a way to solve the ‘German Problem’. This was articulated by Winston Churchill (1946) when he stated that ‘there is a remedy which… would in a few years make all Europe… free and… happy. It is to re-create the European family, or as much of it as we can, and provide it with a structure under which it can dwell in peace, in safety and in freedom. We must build a kind of United States of Europe’ based primarily on French-German reconciliation. Interestingly, 70 years later Churchill’s call to create a more united Europe around Germany has been embraced by another British intellectual with influence on both sides of the Channel, Anthony Giddens (2014, p. 211), who believes that the ‘German Europe’ that has emerged in the aftermath of the Eurozone crisis ‘is not a situation that will remain for the indefinite future, as so many now fear. It is necessarily temporary and it is intrinsically unstable. That is why a federal solution, backed by greater legitimacy and leadership capacity on an EU level, is the only feasible way forward’.
Over the past 50 years Germany’s classical European policy has epitomised the spirit of an ‘ever closer union’. Since the post-WWII era, Germany’s leaders and the public at large have recognised that the only way to preserve peace, stability and prosperity in the Continent is through deeper integration. While the other two big EU powers –France and the UK– have always been jealous of their national sovereignty (a legacy of their centralist traditions), Germany –traumatised by its bellicose past and wary of the Russian threat in the East– has never shied away from proposing the further pooling of sovereignty (a concession facilitated by its federal tradition). This became evident in the 1970s, 80s and 90s when the idea of a European monetary union (EMU) began to materialise. Since the Werner Report of 1970 the debate between German ‘economists’ (who believe in economic convergence and political union as a precondition for a stable monetary union) and French ‘monetarists’ (who see monetary and economic union as precursors of political union) has clearly shown how Berlin has always been more comfortable than Paris with the idea of creating a more federalised EU (Dyson & Featherston, 1999; Marsh, 2009). In fact, Berlin has on numerous occasions over the past 25 years proposed the creation of a political union to make the monetary union sustainable (Kohl 1991; Fischer 2000; Merkel 2012), while Paris has always considered the topic taboo despite continues calls to create a gouvernement économique (Ricard, 2012).
This happened again at the peak of the Eurozone crisis. After two years of foot-dragging, in June 2012 the ever-cautious German Chancellor Angela Merkel seemed to revive the spirit of Helmut Kohl and declared live on German public television that EMU needed a political union to survive. It seemed that Germany was ready to use the window of opportunity offered by the crisis to bring forward the ultimate stage in European integration. However, this was the last time that Merkel mentioned the idea. Since the crucial European Council meeting in late June 2012 –which called for the important step of creating a banking union (with an implicit fiscal union) in the Euro Area– the German government has shied away from actively endorsing the necessity of establishing a political union, despite numerous calls from within and outside Europe for Germany to take the lead in pushing for deeper political integration. Hence, it can be argued that for a long time Germany talked the talk of the necessity of political union, but when push came to shove it failed to walk the walk. This paper’s aim is to attempt to explain the German government’s apparent U-turn.
Three explanations will be put forward. The first relates to the widespread view that Germany is slowly acting as a ‘normal’ European power that, similarly to the UK and France, is more interested in safeguarding its own national interest rather than enhancing the common good. The second explanation is linked to the first and refers to the gradual erosion of support for political union among the German public over the past decades. This was particularly evident in the aftermath of the crucial June 2012 European Council. Once the possibility of a banking and fiscal union was seriously considered at the highest level, the conservative media and pundits in Germany raised the spectrum of a ‘transfer union’ and public opinion turned actively against this possibility.
However, despite the grain of truth that can be found in these two explanations, as will be shown below, they are not totally convincing. We are before a multi-causal U-turn that warrants a third explanation. Berlin’s recent caution regarding the possibility of establishing a political union might have more to do with Germany’s historic status as a reluctant hegemon (Chang, 2003; Paterson, 2011) rather than with a narrow desire to advance its national interests. Thus, it will be argued that, fully aware of the fears that a more assertive Germany can revive in the Continent, the German government still prefers the community to the intergovernmental method in European integration. But given that France is not ready to relinquish its fiscal sovereignty to Brussels, Berlin has decided to stay put on this front. In a nutshell, the main argument advanced here is that, despite the relative importance of Eurozone countries such as Italy, Spain and The Netherlands, the Franco-German marriage is still the key partnership in Europe. Hence, Germany is still waiting for France to construct jointly the political union that is necessary to make the euro sustainable.
The paper is organised as follows. After this introduction, the second section provides a theoretical framework. Two conceptual devices will be employed: money and hegemony. Drawing from the Chartalist school of money, it will be explained that for EMU to endure the Eurozone will have to create a legitimate political authority that can centrally underpin the euro. Germany could potentially be the hegemon to drive such a process but, given Europe’s past, Berlin will need to achieve this in partnership with Paris and in a non-hegemonic way. The second section summarises chronologically Germany’s attempts to convince France to establish a political union. It shows how the June 2012 European Council can be seen as a turning point in this strategy. Following up, the third section presents the three explanations summarised above which might help to understand Germany’s recent reluctance to pursue political union. It will show that Germany remains committed to further integration but its reluctant hegemon status prevents it from pushing forward without the support of France. The paper ends with some concluding remarks.
Miguel Otero-Iglesias
Senior Analyst, European Economy and Emerging Markets, Elcano Royal Institute.
[1] I am very grateful to Michele Chang, Albrecht Sonntag, Federico Steinberg and Ignacio Molina for their useful comments and suggestions.
