Thu, Aug 30, 2012 - Page 9 News List

Increasingly angry Germans will end up deciding Europe’s fate

Starkly divided opinion in the EU’s biggest economy could be as big a threat to the euro — and the EU itself — as Greek debt and Athens’ possible exit from the euro

By Hans Kundnani  /  The Guardian

As speculation about a Greek exit from the eurozone continues, Germany is pushing ahead with plans for a new treaty that will transform the EU.

According to this week’s Der Spiegel, German Chancellor Angela Merkel wants European leaders to agree by the end of the year to hold a constitutional convention in order to fashion a new legal basis for the EU — even though most other member states are opposed to the idea of another tortuous and risky treaty negotiation so soon after the failed European constitution and the Lisbon Treaty. The plan could dramatically reshape the EU in Germany’s image — or lead to it falling apart.

On Friday, Merkel rejected Greece’s plea for more time to implement austerity measures while affirming that she still wanted it to remain in the euro. There had been some signs that German anger about Greece had dissipated — Bild published a surprisingly positive interview with Greek Prime Minister Antonis Samaras last week — but at the same time, confidence is growing that a Greek exit from the euro could be contained. Figures such as Volker Kauder, the parliamentary leader of the Christian Democrats, and Philipp Rosler, vice chancellor and leader of the Free Democrats, the junior partner in Merkel’s coalition government, have said they no longer fear a Greek exit.

However, the debate in Germany is now moving beyond Greece towards the question of political union. During the two-and-a-half years since the euro crisis began, Germany’s approach has been to seek to impose its own economic preferences on the eurozone. It insisted that all eurozone countries agree to enact an equivalent of the constitutional amendment it passed in 2009, which required it to maintain balanced budgets. Many, including the Guardian’s leader writers, have seen in Germany’s approach a kind of economic imperialism. However, Germany seems to be coming to the conclusion that it is no longer enough to try to remake the eurozone in its image in economic terms; it must do so in political terms as well.

Although Germany has often been accused of doing too little too late for the eurozone periphery, many Germans think they have already done too much too soon. They perceive a creeping mutualization of debt, in which they are assuming liability without control — in other words, throwing astronomical sums of money into a bottomless pit without being able to enforce austerity measures or to stop eurozone leaders such as French President Francois Hollande from taking steps such as changing the retirement age from 62 to 60. As a result, there has been increasing anger in Germany at the bailouts. (The German Constitutional Court is expected to rule on the constitutionality of the European Stability Mechanism, the eurozone’s 500 billion euro [US$626 billion] rescue fund, on Sept. 12.)

Many Germans see the idea of a more extensive and permanent form of debt mutualization — for instance in the form of eurobonds — as the creation of a “debt union” in which they and other surplus countries would assume unlimited liability for deficit countries’ debt while giving up what leverage they have to enforce structural reform. Germany’s constitutional court has already ruled that open-ended debt mutualization of this kind would violate the Basic Law — the federal republic’s constitution.

This story has been viewed 1945 times.
TOP top