The European Council on Foreign Relations

We need a more honest EU debate in Germany!

Date: 2nd July 2012  |  Author: Ulrike Guérot,

Categories: Euro Crisis, Germany in Europe,
Tags: , eu, euco, euro crisis, euro crisis , germany , germany

The dust has settled after the last European Council and it is time to conclude that while the results were mostly positive – the German reaction to the outcome of the summit was appalling. Judging on the mostly very hostile, not to say aggressive German press, one may come to the conclusion that most Germans would agree with the recent New York Times article arguing for a German euro exit. Browsing not only through the German press over the weekend, but, more importantly, through online reactions of German citizens to various articles, you could get the impression that Germany is heading towards a catastrophe.

Merkel was accused of having crossed multiple red lines of sacrosanct German positions. She not only faced criticism from some of her own party members, but also from Green opposition leader Jürgen Trittin and large parts of the SPD. Both urged her to explain and justify her u-turn. I must admit that I found this rather peculiar because the Greens and the SPD have been presenting themselves as the true European parties throughout the euro crisis, constantly criticising Merkel for doing “too little too late”. Moreover, both parties have consistently been arguing for eurobonds and more growth. It seems bizarre to critisise Merkel when she moves exactly in this direction.

If this were just a normal opposition game then it may be justifiable, but in the current context this is a dangerous thing to do. Merkel’s crisis management strategy of moving with invisible steps towards debt mutualization will not bear fruit if the gap widens between the chancellor doing the right things for Europe - and Germans thinking she is destroying the German constitution, robbing the German tax payer and betraying the countries overall national interest. Politics must be honest and here both, parties in power and opposition, carry responsibility. It is not the time to play with public opinion, but to make the case for ‘more Europe’.

Politicians need to be honest about the fact that ‘more Europe’ necessarily means less national sovereignty. It is also not fair to hide behind legal arguments and impossibilities. Not the federal court in Karlsruhe, but ultimately the German people should have the last word on how European Germany wants to be. The European destiny of Germany should be decided politically, and not by a court. Also, history should not be frozen into flawed treaties: German politicians ought to confess to the German people that the Maastricht treaty is legally flawed. It is therefore ridiculous to make now a ferocious legal argument against the ESM and the direct bank loans in order to preserve an unworkable “no-bail-out” clause at any price, but rather explain why Germany has now an interest in creating a banking union.

The call for a transfer of bank supervision from national regulators to the ECBis the most important decision of the EU Council. This measure corrects one of the most important flaws of monetary union, which had created a situation in which banks act transnational, but in case of difficulties, would be bailed out on a national basis. This is very good news and should be celebrated. It is a decisive step towards improving the system of euro governance and banking regulation – and it is in the German interest. Though the summit statement is vague in detail, one can hope that a transfer of supervision of all euro area banks to the ECB will be implemented. This would be a huge change, including an unavoidable loss of sovereignty.

The summit, however, did not go as far as establishing a ‘Bank Resolution Authority’ or a ‘European Deposit Insurance Fund’ – which would be useful steps but are impossible to achieve if the German public is already infuriated with last week’s outcomes. The egocentrism of the German press is unbelievable in this respect: Merkel de facto prevented a Spanish (and perhaps Italian) bankruptcy at a rather low cost. For all those who think that Germany cannot be a wealthy island of the happy few in the midst of a European mess, this was smart German crisis management rather than a defeat.

In conclusion, the summit results are a step in the right direction and it is decent progress in breaking the feedback loop between banks and sovereigns. It is rather disappointing that no agreement on a full banking union could be found, consisting of joint supervision, resolution authority and deposit insurance. Yet, there is nothing in the Council Conclusions that justifies the outcry of the German press. Europe needs more honesty. Germany cannot go around and talk about ‘more Europe’ and a political union (like foreign minister Westerwelle prominently did) without communicating it better when first steps towards more fiscal and political unity are taken. The resistance of public opinion at home is the disease of Merkel’s strategy.

In 1992, 80% of the German public were against the introduction of the euro, but we did it nevertheless. Now, we are in the process of a step-by-step strategy towards debt mutualisation but 70% of the German public are against it. I do not think this will work - and it’s dangerous to think that it could.

Perception is what matters most: Good European solutions should not be imposed onto Germans; good European solutions should simply be good solutions for Germany. Germany is needed for the solution of the crisis and nothing will be done without, let alone against Germany. If German politicians are too afraid to tell the truth – which is that more summits with ever more abandoning of sovereignty are about to come – then we may better stop talking about  ‘more Europe’ and ‘political union’.

If we still pretend that we are serious about what we are heading for – an ambitious project of a political union with deeper fiscal integration - then I would argue that we’d better spend at least a part of the 120 billion pact for growth decided at this EU summit, for youth exchange and common language promotion programs. If we want to build a transnational democracy, this is what we will soon need most. Europe will need some sort of bilingualism with a common administrative language. And this will also come in handy for any future direct elections of a European president.