Opening Remarks

Europe’s Debt Crisis Has Become a German Identity Crisis


(Corrects third paragraph to clarify Europe’s treaty requirements for state bailouts and Schäffler’s voting record among Free Democrats.)

“Germans, we don’t look to see what’s in our own national interest,” says Frank Schäffler. “We’re drunk with Europe.” Schäffler, a member of the Bundestag, Germany’s lower house of Parliament, is speaking on the phone from his home district of Bünde. In two sentences he highlights the bedrock assumptions of postwar German politics: Greater European integration is always and necessarily a good thing, and Germany has no interests of its own. “As a good German,” Schäffler explains, “one has to be a good European.”

The debt crisis in Europe has become a crisis of German identity. The rising likelihood of a Greek default has left the Continent’s most powerful nation with an unpalatable choice: back away from its insistence on responsibility and monetary stability and agree to help purchase Greece’s sovereign debt; or hold fast and risk the collapse of the euro. To a considerable degree, the future of Europe’s banking system, its monetary union, the fate of the global economy, and Barack Obama’s Presidency now rest on how Germans decide to act. And to understand why Germans are struggling with the role they’re being asked to play in the 21st century, you need to understand that they are still very much attempting to atone for the 20th.

Schäffler is a member of the Free Democrats, a small party of what Americans would call libertarians, serving as the junior coalition partners to Angela Merkel’s much larger and more conservative Christian Democrats. In the summer of 2010, the leaders of the euro zone countries put together the European Financial Stability Facility, which can issue up to €440 billion ($600 billion) worth of bonds to tide over countries having trouble staying liquid. More than a quarter of this capacity came from Germany. The euro zone countries lent their credit to the facility, too, which is what bothers Schäffler. Europe’s legal foundations rest on multistate treaties, and the most recent treaty, awkwardly, contains what has come to be known as the “no bailout clause”: No member state should be liable for the fiscal decisions of another. Any new bailout plan, then, requires a new treaty and a new round of ratifications. When the temporary facility went to the Bundestag for a vote, Schäffler, along with only one other member of his party, voted no. For direct bilateral aid to Greece, he voted no as well, completely alone among the Free Democrats. “Within the party,” he says, “they told me ‘that’s not what you do.’ ”

Barely a year later, Greece is even closer to default, and Merkel is sending back a new treaty amendment that would replace the temporary “facility” with a permanent “mechanism”—a blueprint, in other words, for future bailouts. The party leadership of the Free Democrats has signaled a yes vote, but Schäffler has drafted a pledge demanding that all party members agree on whether they in fact want to vote as instructed. The measure is likely to collect enough signatures to force his party to take an internal vote.

Even though Schäffler’s gambit has little chance of actually stopping German participation in future euro zone bailouts—Merkel can find enough votes among opposition parties to get the mechanism approved—the mere prospect of a referendum within a single party has given Schäffler a curious kind of leverage. In Berlin and each of Germany’s states, the leaders of his party have been forced to take positions both on his pledge (reluctant acceptance) and the bailout mechanism (reluctant support). Film crews now trail Schäffler to town halls merely because he’s not doing what he’s supposed to. “What’s un-German,” says Schäffler, who looks like a 15-year-old with grey hair, “is not just that you say ‘no,’ but that you attempt to find a majority for your position.”

Among those who have lent their names to Schäffler’s pledge is Burkhard Hirsch, who represented the Free Democrats in the Bundestag over three decades, including four years as the body’s vice-president. “I’m not sure that what we’re doing will change too many opinions in the short term,” he says when reached by phone at his office in Düsseldorf. “But this was important, that someone stand up and say ‘I’ve had it up to here with redeverbot.’ ”

Translation: He’s tired of being forbidden to speak openly about Europe. All major parties in Germany are pro-Europe parties. Hirsch and Schäffler are only doing publicly what Merkel, as she temporizes over each new step that might save the euro, must surely be doing in private. They are talking about Europe, entertaining the idea that it sometimes has negative consequences for Germany, and debating whether Germans should always support more of it.

The mere hints of German deliberation over the euro are causing heartburn on both sides of the Atlantic, but the fact that Germans are openly debating their role in Europe is a healthy development. And in the long run, it may be the key to saving the European project itself.

 

Europe drowns in institutions, acronyms, and hope, and it’s helpful to imagine it as a series of concentric circles. The broadest circle represents “Europe,” the philosophical ideal of a continent that has overcome its demons and built a lasting peace. Inside it sits the European Union, a legal entity that draws up laws and attempts to coordinate policy among its 27 member states. Deeper still, the euro zone binds the 17 countries that have adopted a common currency. At the center of all of these circles, unmissably massive, sits Germany.

By population, a corresponding state in the U.S. would encompass Texas, New York, and Massachusetts, or the entire West Coast plus Nevada. Twenty-seven countries send members to the European Parliament; roughly one in seven members is German. One reason Europe’s Parliament has so little power within the union is that, if granted the authority to hold the purse strings and elect a head of government—like any other parliament—it would give Germany a voting bloc like the Solid South. Europe is founded on the illusion of German money without German control. And that bargain has worked, until now, because of the way Germany sees itself within Europe.

Tug on any thread of public life in Germany, and you unravel—still—the legacies of World War II. The European Union began as a way to bind France and Germany through trade, to prevent both from crossing the Rhine again. As a 12-year-old, former Chancellor Helmut Kohl served in a school brigade clearing rubble after Allied air raids, according to his memoirs. In 1984, in late-September overcoats at a World War I cemetery in Verdun, France, Kohl and François Mitterand, then President of France, clasped hands. A photograph of the two came to define the relationship between the countries: grim, firm, and profound in their attachment, joined by a need to redeem the past. Together, Kohl and Mitterand drove the Maastricht Treaty of 1992, which created the legal body of the European Union. And in Maastricht the two set a deadline for monetary union of Jan. 1, 1999. The euro would come, they decided, and the rest would follow.

An unwavering dedication to ever-deepening union was Kohl’s way of proving, at each step, that Germany could answer for what had happened when he was a child. The euro is not about economics. It’s not even about politics. It’s about peace.

In 1998, just months before 11 countries adopted the euro, George P. Shultz went to a meeting of economists in Berlin. An economist himself by training, Shultz had served as Secretary of State under Ronald Reagan. At the time, Kohl was finishing the last of 16 years in office as Germany’s Chancellor. The two were friends from the Cold War, and Kohl came to the meeting. The economists were concerned; Europe was entering a monetary union before building the political and fiscal institutions to sustain it. “[Kohl] listened to this for a while,” recounted Shultz in an interview with Bloomberg News on Sept. 19, “and said ‘The decision has been made. It is a matter of war and peace. It is up to you financiers and economists to make it work.’ And he gathered up his considerable bulk and left.”

Germany’s establishment holds Merkel to that same standard. But though Kohl mentored Merkel and elevated her from obscurity to his Cabinet, she is not Helmut Kohl. By her own admission, Merkel thinks cautiously and analytically. She has not rushed to help southern Europe without reservation; she has insisted on austerity, wage control, and entitlement reform in return for opening up Germany’s coffers. And with each step, she has deliberated. A chorus of former Chancellors has called on her to act more quickly and instinctively in support of the euro. In May, Gerhard Schröder, her predecessor, told Bloomberg News that she had failed to lead. Germany’s policy has been “too hesitant,” he said. “Someone has to say ‘that’s enough’ more often.” And in July the weekly Der Spiegel published a secondhand and anonymous report that Kohl—a living titan of Merkel’s party—said “She’s making my Europe kaputt.”

Regardless of whether Kohl actually said it, there’s some value in noting Spiegel’s glee in reporting it. The quote is too perfect to ignore. From Schröder comes the hint that Germany is the adult in the room. From Kohl, the idea that Germany made Europe and still owns it. As Merkel pauses to think about what comes next, say the ex-Chancellors, she’s squandering our Europe, our inheritance.

 

In September the German federal constitutional court turned back constitutional challenges to the temporary bailout facility, the one Frank Schäffler voted against alone. According to Thomas Risse, director of the Center for Transnational Relations, Foreign and Security Policy at the Freie Universität Berlin, the court’s decision looked at the spirit of the existing treaty, not the letter. The purpose of the treaty is to preserve the union, he explains. If a slavish adherence to the no bailout clause fractures the union, the spirit of the treaty isn’t being fulfilled. This is a break with Germany’s legal tradition. Germans are legalistic, he explains, and points to a phrase Germans use to describe their discomfort with pragmatic solutions: “Sometimes,” he says, “you just have to let a five be even.”

And yet even as the court decision upheld the legality of the current bailout facility, it left a warning, too. No interstate treaty, it declared on its opening page, can subject a nation indefinitely to the economic consequences of the decisions of another state. In other words, anyone who wants to use Germany’s credit rating for anything is going to have to come back to the Bundestag, every time.

Schäffler and Hirsch, the rogue Free Democrats, wouldn’t describe themselves as anti-Europe. They object to the union of Kohl and Mitterand, where Chancellors and Presidents strike pragmatic agreements, seldom sending them back to citizens for a referendum. The European Union, explains Hirsch, is a union not of peoples but of heads of state. “General Franco,” he says, “was a head of state, too.” Asked what a union would have to look like to possess the legitimacy to make budgetary decisions, he laughs. It’s the long, caustic laugh of a man who’s been in politics too long to believe in fairies. Europe would need a real parliamentary form of government, he says, with a Parliament that runs the budget and proposes legislation. He’s still chuckling as he describes, sincerely, his vision of a dream Parliament. It happens to match precisely that of the most fervent pro-Europeans, lifers in the European Parliament. In a survey this September by Der Spiegel, clear majorities of Germans said that it wasn’t right to help Greece and other countries with the bailout fund and that Germany was not benefiting from the euro zone. But a clear majority also believed that European institutions should be given more power in a crisis.

Schäffler and Hirsch aren’t cranks or closet nationalists. They’re just refusing to let a five be even. In the end, they’re almost certain to lose. The bailout mechanism will pass. But their arguments are worth listening to. The euro crisis has exposed a structural problem in the European project that can’t be solved by claiming, simply, that Europe must survive. There are smaller decisions to be made, trade-offs about the amount of sovereignty every state will have to give up if the euro countries are to be able to make fiscal decisions together to match their monetary union. Germany shouldn’t have to prove anything. These questions are hard enough without the extra burden of war and peace.

With Tony Czuczka, Angela Cullen, and Andrew Frye
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Greeley is a staff writer for Bloomberg Businessweek in New York.

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