The European Council on Foreign Relations

Germany in Europe: Germany 2.0? The calm before the storm

Date: 20th January 2011  |  Author: Ulrike Guérot, Mark Leonard,

Categories: Germany in Europe,
Tags: eu, euro crisis, germany, merkel

Spring has come early to Berlin. The mountains of snow that covered the city during its fairytale style ‘White Christmas’ setting have melted. The streets are grey and awaiting the cleansing of spring showers. And the city is abuzz with speculation that the German government will abandon its hesitant and reactive stance on Europe – and make a big leap forward on the euro.

In 2010, the German authorities were in denial about their power.  An aide to the chancellor told us in the middle of last year that “we don’t want to lead Europe: we just want the others to obey the rules”.  But after months of shunning leadership, Berlin is visibly preparing for a big step forward: to give unlimited backing for the Euro-debt, in combination with tough measures on common economic governance and strengthening fiscal control in EU member states. Anyone who walks into the ministries and chancelleries of Berlin can hear a change of tone, a sense that the government is gearing up for action, that Germany not only decided in December that it wants to save the euro at any price, but that it is now shaping the conditions (not to call them ‘strings’ for the other EU members) under which it would do so. Fed up with casting itself as a victim and being reproached for doing ‘too little, too late’, the Berlin government is facing up to its status as the eurozone’s hyper-power, and reluctantly taking on the responsibility for making the euro work.

 ‘Solidity and Solidarity’ seems to be the new narrative. The idea is a grand bargain where Germany will trade solidarity with defaulting EU countries against their guarantees to seek solidity in their fiscal and economic policies.  Communications are definitely starting to change. After all, the umbrella may even be beneficial for Germany, said Klaus Regling, the German Director of the EFSF, in todays’ DLF. Schäuble and Merkel hope to launch the approach at the EU Council on 23/ 24^th March, but there will still be challenges to their approach at home and on the European stage.  It will all happen in a very difficult domestic environment for Merkel, with a defaulting coalition partner led by a foreign minister who many feel is already on the way out, and very difficult regional elections.  In fact the vote in Baden-Württemberg will be on the 27^th March, just three days after the Council.   The European environment is no more straightforward.  President Barroso has signaled that many do not want to delay further action to meet Germany’s domestic political timetable (particularly as there could be up to seven elections in Germany this year).  Furthermore, Berlin’s ideas on ‘solidity’ (seen as code in many capitals for ‘haircuts’ for investors and austerity) will still meet opposition in many capitals.  Officials in Berlin are in no doubt that the politics will be complex, but they seem determined to adopt a more assertive stance.  Berlin seems to be experiencing the calm before the storm. But once the storm is over, there could be a promising fresh breeze for a reconstituted ‘Euro 2.0’ hanging over Europe.

Share or like this blog post Print this post