Germany’s growing role in Europe

This is my latest Perspective column for Fund Strategy.

Given Britain’s obsession with the second world war it is perhaps surprising that the surge of Germany’s profile in European politics has attracted little comment. Few on this side of the Channel seem to have noticed the extent to which Germany has raised its profile in continental Europe.

Admittedly there was some British discussion of the German proposal for Greece to cede control over tax and spending decisions to a eurozone “budget commissioner”. But such a move, serious as it is, would only represent an incremental change in the removal of Greek sovereignty that is already underway.

More striking is the new relationship between France and Germany. This goes way beyond the increasingly popular caricature of “Merkozy”: Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president, acting together in European matters.

France, it should be remembered, has fought three wars against Germany since 1870. French support for the ­European Union (EU) and its predecessor organisations was always partly motivated by a desire to contain German power

Yet in the run-up to the French presidential elections in spring, Sarkozy has invited Merkel to campaign with him. Last week Merkel brought half her cabinet colleagues along to a joint summit in Paris. During the trip she did a joint press conference without the use of bulky lecterns so that the two leaders could stand side by side. Bild, Germany’s equivalent of the Sun, illustrated the story with a picture of the two leaders smiling and gazing into each other’s eyes.

A week earlier Sarkozy used a peak time television interview to announce that he was planning to introduce German-style reforms to bolster the French economy. Earlier the same day Merkel said publically she would support Sarkozy’s campaign for re-election. The secretary-general of her Christian Democrat party, Hermann Gröhe, also attended a meeting of Sarkozy’s Union for a Popular Movement party.

The new relationship has been criticised in both countries. François Hollande, the socialist candidate in the French presidential election, warned Merkel to exercise restraint.

In Germany, Guido Westerwelle, the foreign minister and member of the minority Free Democratic Party, said that: “The federal government is not party to the French election campaign”.

Nevertheless the relationship between the two leaders remains astonishing. It is hard to imagine such overt German intervention in a French election a few years ago.

Nor is Sarkozy necessarily even Merkel’s closest ally in Europe. Some commentators have suggested that the ties with Mario Monti, Italy’s technocratic prime minister,

are closer.

Germany’s rise to playing a prominent political role in Europe would have appeared remarkable to earlier generations. In the decades following the second world war Germany played a carefully low profile role in European and global affairs. Overtly intervening in the internal affairs of other European states would have been out of the question.

But it would be a grave error to identify even a vague echo of a Fourth Reich in Germany’s new profile. The intervention of relatively strong powers in the domestic affairs of other states is always problematic. But it is hard to find even remote parallels between developments in contemporary Europe and those of the past. There are at least three peculiar features of Germany’s involvement with other European countries that are noteworthy.

First, in most cases Germany prefers to operate through the institutions of the EU rather than unilaterally. In that sense the direct relationship between Merkel and Sarkozy is unusual. Germany generally prefers to promote technocratic fixes, often involving the imposition of German-style rules, through a regional framework.

Second, Germany often appears genuinely reluctant to intervene directly in the internal affairs of European states. In particular it is wary of having to commit a large amount of German funds to European bail-outs.

At her recent keynote speech to the World Economic Forum in Davos the German chancellor emphasised the limits of her country’s ability to save the euro. She echoed an earlier interview she had given to the Süddeutsche Zeitung, a German daily newspaper, in which she said: “Amid all the billions in aid and rescue funds, we Germans also must watch that we do not lose our strength in the end – because our possibilities are not endless either, and that would not help Europe as a whole.”

Finally, many other European leaders seem keen to encourage EU institutions, and sometimes even Germany directly, to play a wider regional role. It is hard to imagine Merkel offering to play such a high profile role in the French elections, for instance, unless Sarkozy was keen.

Of course, it is possible that some elaborate play acting is going on. Perhaps Germany is exerting pressure from behind the scenes to get others to invite it to take a more active role in Europe.

However, such a conspiracy seems extremely unlikely. What appears to be happening is that Europe’s political class is losing its will to lead. It prefers to hand over key decisions to EU functionaries and domestic technocrats who in turn both adhere to rigid sets of rules. In that respect Germany is a model as it has long pursued its own rule-based approach to government (see “Power of ­stability is order of day”, Fund Strategy, November 21, 2011). In turn the EU has also institutionalised this form of decision-making.

The trend is not so much towards German domination but rather the Germanisation of Europe. Other countries are adopting Germany’s rigid approach to policy.

The result of this process is the disenfranchisement of Europe’s citizens. Key decisions are being made by unelected technocrats rather than by elected representatives of the public.

Europe is not facing German domination but rule by a technocratic clique. This situation has not come about by force but by the abdication of leadership by Europe’s politicians.