Thursday 21 November 2019

Germans do not want a Europe of broken promises

The eurozone demands so much from its powerhouse economy, Germany, yet offers little in return. Wolfgang Nowak, formerly a senior adviser to Gerhard Schroder, outlines the German view ahead of today's key Berlin vote on the legality of the bailouts.

German Chancellor Angela Merkel during a session of the
Bundestag in Berlin yesterday
German Chancellor Angela Merkel during a session of the Bundestag in Berlin yesterday

Wolfgang Nowak

IN the run-up to the launch of the single currency, there was a joke doing the rounds in Paris: "When the euro is introduced, all the poor Frenchmen will become rich Germans -- and all the rich Germans will become poor Frenchmen." It wasn't particularly funny at the time, and it certainly isn't now.

Today, the rest of Europe is looking to Germany to save the European project. Today, the country's constitutional court will rule on the legality of last year's bailout for Greece, Ireland and Portugal. Later in the month, the German parliament will vote on whether to accept the rescue facility agreed by Europe's leaders.

If either body votes the wrong way, we Germans are sternly warned, it will plunge the Continent into chaos.

Frankly, however, an increasing number of my countrymen are finding it hard to see why they should come to the rescue of a currency that demands so much, and seems to offer so little. For them, the "Europe of the euro" has become a Europe of broken promises. We were told that Maastricht would produce a culture of fiscal rectitude, with sanctions for nations that broke the rules. Instead, its criteria were disregarded by all, including the German government. We were told by Gerhard Schroder that he would make an "honest" currency out of the euro. But his first official act was to admit Greece, a country that had been blatantly falsifying budget figures. We were told that the European Central Bank would be as independent and responsible as our beloved Bundesbank. It is now buying hundreds of billions of euros of low-quality government bonds. We were promised that the introduction of the euro would not lead to a fiscal transfer union in Europe.

Instead, we are being asked to participate in one euro rescue fund after another, and the extent of the debt that potentially faces our country exceeds the imagination.

In short, we Germans are becoming increasingly aware that we are in a European Union that keeps piling up new debt to fight old debt. The golden thread holding it all together is Germany's solvency -- but the fact that the EU can rely on our contributions means that France, Italy and others can ignore the reforms that their economies desperately need. And when the Germans start asking for guarantees in exchange, they are accused of trying to create a "Fourth Reich". German money is fine, but not German reforms.

Now, we are faced with the ultimate expression of this trend. In unison, speculators such as George Soros and politicians such as Luxembourg's Jean-Claude Juncker -- and, more covertly, nearly every southern European country -- are calling for the introduction of "eurobonds". These, they say, would stave off the debt crisis, by making government borrowing cheaper and less risky for investors. Yet it would also place the burden of liability on Germany. Eurobonds are being hailed as the remedy to cure the Continent's ills -- yet as we all know, nothing can keep countries like Italy, France or Greece from breaking any new promises they make. Germany would not just become liable for other countries' failings. It would be paying for the election promises of other governments that have neglected their own structural reforms.

Of course, Germans are aware that fiscal transfers can work: we became a successful nation after World War Two because such transfers took place, and are still taking place, between the wealthy and poor states of our own country. What Germans would like to refuse Greece and others, they are happy to tolerate in their own country. The debt levels incurred by Berlin, Bremen and North-Rhine Westphalia are scandalous, and nothing is being done about them.

Yet it is expecting too much of Germany -- and other wealthy nations, such as Finland and the Netherlands -- to transfer this concept to Europe as a whole. The European Union, and the eurozone, have become too big. The only way the euro can become "honest" now is if its members launch the necessary reforms, streamline their bureaucracies and stop borrowing beyond their means.

A Europe supported by eurobonds would certainly make everything a lot easier -- and everyone much more reckless. But in Germany, their introduction would lead to a large majority of the population rejecting such a Europe entirely. At the moment, Angela Merkel still faces a pro-European opposition. Yet public opinion is wavering, as indicated by opinion polls and the poor performance of Merkel's party in elections at the weekend. Were a transfer union to become a reality, public enthusiasm for the European project would plummet. The strength of sentiment would be such that no government in Berlin could ignore it.

WE need a Europe that invests in new technologies instead of interest payments, one that devotes itself to improving education instead of organising new borrowing at favourable terms using German money. Only an economically strong Continent can play the role in global politics that everyone expects. So far, we Germans still want to be good Europeans. However, a Europe that is held together only by German money is bound to fail -- because it is not one that the Germans will accept. (© Daily Telegraph, London)

Irish Independent

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