Fri, Jan 02, 2009 - Page 9 News List

German aversion to stimulus plan raises questions

By Hans-Werner Sinn

A third hypothesis to explain Germany’s hesitancy is suspicion of the EU’s redistribution machinery. When Sarkozy and other EU leaders demand Germany’s participation in an economic stimulus and rescue package, one reason is that they expect Germany to again bear the lion’s share of the costs. For example, of the 5 billion euro extension of the Cohesion Funds approved by the European Parliament in December 2007, Germany received nothing, but it bears 20 percent of the costs.

Germans have always been enthusiastic proponents of the EU, not least because they hoped that a European identity would help compensate for their damaged national identity. So, whenever it came to restructuring the EU, they always accepted a level of influence that was small relative to their country’s size. Although Germany’s share of the EU population is 17 percent, it receives 13 percent of the voting rights in the EU Parliament. Its share in the more important Council of Ministers is only 8 percent, the same as that of the French, whose population share is 13 percent.

Former French president Jacques Chirac did not hesitate to justify this imbalance with a reference to World War II, which the Germans accepted. But their enthusiasm has limits. After all, aside from political underrepresentation, Germany’s annual contribution to the EU budget (most recently 7.4 billion euros) makes the country by far the largest net contributor. Germany finances 20 percent of the EU budget but receives only 12 percent of EU spending. Willingness could be exhausted if the EU budget is further expanded without reducing Germany’s net contribution and narrowing the gap between its financing and voting rights.

For these reasons, German reservations also extend to the European economic government that Sarkozy advocates, and that, again, would be financed more than proportionately with German money. Sarkozy regards an EU economic government as a way to preserve his leadership in the EU beyond France’s Council presidency, which ended on Wednesday. Although the Czech Republic assumed the EU presidency yesterday, this has not prevented the French president from convening a new EU summit under Sarkozy’s leadership in the first half of this year.

This affront will put not only Czech tolerance to the test, but also that of Merkel. In the end, she will probably give in to Sarkozy’s wishes to avoid endangering her chances of re-election in September because of a conflict with the French. But she will surely do so with clenched fists.

Hans-Werner Sinn is president of the Ifo Institute.COPYRIGHT: PROJECT SYNDICATE

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