Toward a Gentler, Kinder German Reich?

With each passing day, European Integration – the longest running political soap opera – is increasingly resembling the infamous “don’t mention the war” episode of Fawlty Towers.  In a recent op-ed entitled “Germany has declared war on the eurozone,” the editor-at-large of the respected London Times minced no words about Germany’s grand strategy in the past two years:

“If Clausewitz is right that “war is the continuation of policy by other means”, then Germany is again at war with Europe, at least in the sense that German policy is trying to achieve in Europe the characteristic objectives of war: the redrawing of international boundaries and the subjugation of foreign peoples…. Angela Merkel, the German Chancellor, has consistently claimed that Germany will “do whatever it takes” to save the euro. But what she has actually done is consistently to refuse to take any of the necessary action. She has also prevented European institutions from taking such actions, even when the German veto had no legal or moral justification.”

Not to be outdone, The Economist that same week castigated Angela Merkel’s “pigheaded brinkmanship” and argued that she “cannot continue to threaten feckless economies with exclusion from the euro in one breath and reassure markets by promising the euro’s salvation with the next. Unless she chooses soon, Germany’s chancellor will find that the choice has been made for her.” [1] What’s the fuss really about?

In the past two years, German elites have taken up the Rahm Emanuel doctrine (“never let a serious crisis go to waste”) all the more eagerly that Washington, in the process of rebalancing away from the Greater Middle East to the Asia-Pacific region, is less interested than ever in following intra-EU affairs.

For the third time in less than twenty years, Germany is trying to force down the throat of Europe a federal “political union” which, in the eyes of too many European observers, eerily resembles a gentler, kinder Anschluss.  While Europeans were able to push back against the first two attempts, the two-year long financial crisis has created within Europe a “German unipolar moment” and provided the kind of leverage that had eluded Germany earlier. With the German Chancellor as a de facto “EU Chancellor,” German elites are leveraging the crisis by playing a game of chicken in order to make their federal vision prevail.

Demographically and economically, Germany is one third larger than either Britain or France. In the past ten years, this predominance has already been reflected in EU institutions, both quantitatively (Germany has the largest representation in the EU parliament) and qualitatively (the European Central Bank is a clone of the Bundesbank).  But that’s apparently not good enough for Berlin, who has deliberately let the crisis move from the periphery (Greece and Portugal) to the center (Italy and France) in order to extract the maximum of concessions from the rest of Europe.

The Specter of Friedrich List

German academics and politicians alike never tire of reminding foreigners that post-1945 Germany has forsaken military power and is best conceived of as a “civilian power” (Zivilmacht). And they’re right.  In fact, they could safely argue that, from the standpoint of the longue duree, the specificity of German strategic culture is better illustrated by the economic might of the Hanseatic League of merchants and the Fugger dynasty of financiers than by the military might of the Teutonic Knights and of the Hohenzollern dynasty.

It’s easy to forget that, in the two hundred years since the end of Napoleonic Europe, Germany has been a “military power” for only fourteen years, and has behaved as a “civilian power” the rest of the time.

From 1818 to 1864, it is not through military force, but through an ever-widening and ever-deepening customs union (Zollverein) that Prussia managed to incrementally dislodge Austria from the leadership of the German Confederation.  It is only after Austria’s refusal to integrate the Zollverein on Prussian terms that Prussia itself abandoned civilian means for the “blood and iron” approach. Having achieved German unity under Prussian leadership and Prussian terms through three short wars (1864-1870), Bismarck quickly reverted to Zivilmacht.

From 1871 to 1914, it is through civilian means again (mainly, the 1879 alliance with Austria-Hungary) that the newly-created German empire proceeded to create in central Europe a greater informal empire known as Mitteleuropa. Even during the Great War, Germany’s main war aim was essentially to create a Europe-wide Customs Union (with a few annexations here and there). From 1919 to 1939 again, it is mostly through “civilian” means that German renewed its quest for an informal empire throughout Europe. And from 1940 to 1945, the uncomfortable truth is that Nazi Germany created a “Central European Economic Community” which, in many ways, anticipated the “European Economic Community” created by the Treaty of Rome (1957).

After WWII, Germany first used European integration as a way to regain a “political virginity” of sorts on the international scene. Then, in 1969, with the establishment of a full-fledged EEC customs union (and De Gaulle’s departure from the scene), Germany began, through civilian means, an active Ostpolitik that paved the way for German reunification twenty years later. In 1990, during a famous meeting between Kohl and Gorbachev at Stavropol (quickly dubbed “Stavrappallo”), Germany actually bought its reunification from Russia. From 1990 until today, Germany has gone out of its way to eschew military action, while quietly recreating its economic empire in Mitteleuropa. In short, during the past two hundred years, Zivilimacht has been the norm, Wehrmacht the exception. [4]

But it is also a fact that the German conception of “civilian power” is not synonymous with the American concept of “soft power,” with which it is too often confused in Washington.  While the latter excludes economic power and follows a logic of attraction, the former has economic power at its core, and follows a logic of cooperation when it can, and a logic of coercion when it must. To put it simply: in the history of modern German strategic culture, Carl von Clausewitz has indeed been the exception rather than the norm, but the norm itself has not been Immanuel Kant so much as Friedrich List.

The intellectual father of what has been variously called “economic nationalism,” “mercantile realism” or “geo-economics,” List’s influence on Moltke and Bismarck was decisive for the creation of both the German Reich and Mitteleuropa.  More importantly, Friedrich List has better claims to be the intellectual founding father of the European Union than a Jean Monnet.[5]  Whereas the Frenchman provided the grand tactics (the Monnet Method), the German offered the grand strategy.

In modern times, the heir to Friedrich List is Mitteleuropa-born, American geo-strategist Edward Luttwak.  In a seminal 1990 article, Luttwak declared that, in the post-Cold War era, geo-economics would take precedence over geopolitics.[6] The thesis enjoyed a certain audience in America until 9/11, after which U.S. elites became fixated on the Islamist threat and, in the process, lost sight of what both China and Germany were doing.

In the summer of 2011, German analyst Hans Kundnani published a seminal article on “Germany as a geo-economic power” in The Washington Quarterly. [7] The gist of it? 

Twenty years ago, at the time of German reunification, the prevailing German conception of “civilian power” was the one put forward by Hans W. Maull, for whom “the overriding foreign-policy objective of a civilian power is not simply to improve economic performance or prosperity but to civilize international relations through the development of the international rule of law. In other words, a civilian power aims to make international politics like domestic politics.” In short, Zivilmacht at the time had a strong “Kantian” streak.[8]  But in the past ten years, Kundnani argues, this particular conception has eroded in Germany. First, German civilian power has become less multilateral. Second, the economic dimension has come to the forefront at the expense of the legalistic-normative dimension. Third, cooperation is giving way to coercion:

“Germany is not only increasingly defining its national interest in economic terms, but also increasingly using its economic power to impose its own preferences on others in the context of a perceived zero—sum competition within the eurozone, rather than to promote greater cooperation in a perceived win—win situation. Given these shifts, it has become harder to claim that Germany still ‘‘civilizes’’ international relations in the way Maull suggested. The concept of civilian power is still valid as a normative concept; however, it no longer adequately describes Germany as a foreign-policy actor….

The concept of geo-economics now seems particularly helpful as a way of describing the foreign policy of Germany, which has become more willing to impose its economic preferences on others within the European Union in the context of a discourse of zero—sum competition between the fiscally responsible and the fiscally irresponsible. For example, instead of accepting a moderate increase in inflation, which could harm the global competitiveness of its exports, Germany has insisted on austerity throughout the eurozone, even though this undermines the ability of states on the periphery to grow and threatens the overall cohesion of the European Union.”

In short, Kindnai argues, Germany’s Zivilmacht today is more synonymous with what Luttwak, in 1990, called “geo-economics” than with what Maulls, in 1990 as well, called “civilian power”:

“The nature of a geo-economic power is determined by the relationship between the state and business… Sometimes states ‘‘guide’’ large companies for their own geo-economic purposes and other times companies seek to manipulate politicians or bureaucracies. The relationship between the German state and business would seem to be an example of what Luttwak calls ‘‘reciprocal manipulation.’’ German companies lobby the German government to make policy that promotes their interests; they in turn help politicians maximize growth and in particular employment levels the key measure of success in German politics…

Because much of this [German] growth has come from exports to economies such as China and Russia, where the state dominates business, [German] exporters are also conversely dependent on the German government. Meanwhile, German policy toward authoritarian states… such as China, has tended to focus on trade at the expense of human rights, democracy, and the rule of law.”

Kundnani warns that, as a result of the redefinition of Germany’s self-image, the United States could come into conflict with Germany in two ways:

“First, it could have disagreements about economic policy, as in last year’s standoff between the two countries at the G-20 on issues such as stimulus spending and domestic demand. Secondly, it could struggle to persuade Germany to play an active role commensurate with its size and economic power on global security issues and on crisis management. Germany could be simply unwilling to provide resources, as in Afghanistan, or it could actively undermine initiatives led or supported by the United States, as in Libya. In this case, much will depend on Germany’s role in the UN Security Council, where it has campaigned for a permanent seat since the Schroeder government.”

That said, Kundani argues, despite striking parallels between Germany and China, there is in fact a difference in kind between the two countries. China aspires to Great Power status, Germany is happy with being a Greater Switzerland:

“Of course, Germany is not the only geo-economically active state in the world. Other states, such as China, also use geo-economic power. Indeed, there are striking parallels between China and Germany: both are manufacturer/exporters that have huge surpluses of saving over investment and have recently tended to impose deflationary pressures on their trading partners (the United States for China, the eurozone for Germany). China, however, ultimately aspires to be a great power. Although it currently relies primarily on economic power in its rise, it is also committed to the use of military power… In that sense, Chinese foreign policy can be seen as a kind of neo-mercantilism. Germany, on the other hand, is unique in its combination of economic assertiveness and military abstinence. In a sense, therefore, it may be the purest example of a geo-economic power in the world today.” (emphasis added).

Interestingly, Kundnani’s article fails to make any reference to Friedrich List and/or the geo-economic tradition in German strategic culture.  Instead, the author hints that, if Germany is today becoming a bit like China, it is because this is the only way for Germany to hold its own vis-a-vis China (which is not false, incidentally, but is only half the story). 

True, Kundnani is writing for an American audience and, though the influence of List’s National System of Political Economy (1841) has been felt throughout the world from pre-revolutionary Russia to post-WWII Japan and today’s China, America remains the only country where List has yet to become a household name among educated elites.[9] Then again, the absence of any reference to List could also be due to the fact that, for List himself, there was no such thing a “pure geo-economics.” The foreign policy of a geo-economic power has unavoidably a geopolitical dimension.

Is Chinese “neo-mercantilism” bad and German “geo-economics” good? Is there really a difference in kind between revisionist China and revisionist Germany, or just a difference in degree? Will Germany always aspire to be nothing more than a Greater Switzerland? Is Europe destined to forever remain a Perhapsburg Empire, or doomed to become a Fourth Reich? [10]

The “EU Chancellor”

One thing is sure: in 2011, for the third time since the reunification of 1989, Germany is trying to force down the throat of Europe a federal political union which, for too many Europeans, eerily resembles a gentler, kinder Anschluss.

The first attempt at a federal Europe was put forward in 1994 by Christian Democrat heavyweight Wolfgang Schauble, then heir-apparent to Chancellor Helmut Kohl. Needless to say, the French were not amused at the prospect of the former Grande Nation becoming some sort of maritime Bavaria in a Euro-German Reich, and successfully managed to push back.

The second attempt began in 1999, around the time of the launching of the Euro and the constitutional convention, with Social-Democrat Chancellor Gerhard Schroeder and Green Foreign Minister Joshka Fischer pushing for a “maximalist” federal Europe along the lines of the German constitution.  Since the constitutional convention which opened in 2001 happened to be chaired by a former French president, the end result in 2004 fell short of German goals and, at any rate, this EU constitution was rejected in 2005 by the French and the Dutch in a referendum.

The third attempt today is once again the work of Wolfgang Schauble. Since Schauble had to resign as leader of the CDU in 2000 in the wake of a financial scandal, Angela Merkel took over the CDU and was elected Chancellor in 2005.  But in October 2009, as the global economic crisis was already under way, Merkel appointed Schauble as Finance Minister (arguably the most strategically important ministry in this particular context) and, by March 2010, Schauble was once again campaigning for federal integration. 

In October 2010, in a landmark speech delivered at the College of Europe in Bruges, Angela Merkel created a stir by putting forward the idea of a “union method,” quickly dubbed the Merkel Method. Until then, the method favored by European Federalists of all countries had been the Monnet Method (also known as the “community method”), i.e. a supranational means for supranational ends.

For the cognoscenti, the Merkel Method represented a revolution of sorts in that it signaled that German Federalists today were determined to drop the community method in favor of more muscular method (in essence, an intergovernmental means for supranational ends). Since the unelected Eurocracy itself had long favored the Monnet Method, it was not long before EU Commission President Jose Manuel Barroso, the Pope of the Eurocracy, declared himself against a method that would allow “a few idiots” in one country to “blackmail” the EU. And indeed, what in Eurospeak is now called the “union method” is known in the real world by a more traditional name: coercive diplomacy.[11]

In January 2011, the journal Internationale Politik, the mouthpiece of the German foreign policy establishment, published a much discussed article entitled “The EU Chancellor” by Andreas Rinke.[12] The gist of it?

After the entry into force of the hard-fought Lisbon Treaty in December 2009, no one in Europe expected further integration for years to come. Then came the Greek crisis, which created within the EU a German “unipolar moment” and turned Germany into an accidental hyper-puissance of sorts.  By the time of the EU Summit in December 2010, German Chancellor Angela Merkel had been granted “a kind of ‘agenda setting authority’ within the circle of 27 state and government leaders.”  Not only had the German Chancellor become a de facto EU Chancellor, but she had “transferred her governing style from the national to the European stage.” 

As Rinke puts it, French President Nicolas Sarkozy had to content himself with le second role of EU vice-chancellor. EU Council President Herman Von Rompuy, for his part, had been relegated to the level of a Chancellery chief of staff.  As for the remaining heads of state and government, they constituted hardly more than a Bundesrat (Germany’s upper chamber). The article concluded: it is time to think of the EU as a German-style “government” rather than a “club” of 27 members.

While Rinke’s article went unnoticed in Washington, it created quite a stir in European capitals for three reasons:

First, the idea that the Greek Crisis was the “decisive event” that turned Germany into a hyper power does not hold scrutiny.  For one thing, financially speaking, Greece is simply too insignificant for any Greek crisis to have a regional effect (unless, that is, Germany goes out of its way to refuse to solve it).  For another, the Greeks did not become suddenly “irresponsible.” Forget the morality play, peddled by some German commentators, that today’s crisis pits hard-working Northerners against hard-partying Southerners. It’s not exactly a secret that, having invented “Democracy” way back when, the Greeks have been resting for the better part of the past 2,500 years. The Greeks were not workaholics in the 1990s when Germany agreed to let them in the European Monetary Union, nor have they suddenly turned “lazy” in the past two years.  The truth is actually closer to home.

In 1990, West German politicians estimated that the final price tag for rebuilding East Germany would be no higher than 600 billion dollars. Twenty years and 2,4 trillion dollars later, the “West Germans” feel that they have spent more than enough already on their East German “Greeks” (with little to show for), and they are in no mood to bail out foreigners. In addition, between 2003 and 2008, German bankers have managed to lose massive sums of money in foolish investments in American financial products, and they are now pressing the “EU chancellor” to get the rest of Europe to make up for their losses before German public opinion notices how badly they screwed up.[13]

Last but not least, beginning in 2003, Germany itself was the first EU country to violate the German-inspired Growth and Stability Pact (GSP).  On substance, it was in fact a wise decision; but, as economist Daniel Drezner pointed out, this violation “sent the signal to the smaller countries that fiscal profligacy would go unpunished. Germany’s enthusiastic lending to the periphery only exacerbated the problem.”[14]

In a nutshell: Club Med countries may have been liberally using German credit lines, but they were following Germany’s example and, as Drezner points out, they were buying German goods: “Between 2000 and 2007, Greece's annual trade deficit with Germany grew from 3 billion euro to 5.5 billion, Italy's doubled, from 9.6 billion to 19.6 billion, Spain's almost tripled, from 11 billion to 27.2 billion, and Portugal's quadrupled, from 1 billion to 4.2 billion.”

The irony is that, though initially designed to “contain” Germany, the euro has mostly benefited Germany.  As defense analyst Julian Lindley-French puts it bluntly: “Quite simply, the Euro has offset the high cost of German production and created a customs union (Zollverein) for German exports, which was Germany’s 1914 war aim. So, the EU has done for Germany what two disastrous wars could not, cement Germany as the natural leader of Europe … Having gained more from the Euro than any other EU member-state, the German people are not at all interested in paying to rescue it.”[15]

Second, the idea that Germany’s quasi-imperial status today is “accidental,” i.e. that it is not an empire by coercion but a sort of “empire by invitation” not unlike like the American empire in post-WWII Europe, is a fairy tale.[16]  For the past two years, Berlin has deliberately used all kind of excuses to refuse to take the necessary measures to resolve the crisis, and deliberately let the crisis spread from the periphery (Greece and Portugal) to the center of Europe (Italy and France). As London Times economic commentator Anatole Kaletsky summed it up in the op-ed mentioned earlier:

“As the euro crisis has intensified and spread from clearly bankrupt countries such as Greece to Spain, Italy and now France, it has been acknowledged, at least outside Germany, that three actions are absolutely essential to resolve the crisis and to put the European economy back on its feet. The first would be to restore financial stability by huge purchases of government bonds by the European Central Bank. To be successful, these would have to be on a scale at least comparable with the “quantitative easing” undertaken in the past two years by the US Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank. The second step would be to restore long-term solvency by issuing new bonds, jointly guaranteed by the entire eurozone, which would replace some of the government debt run up in countries such as Greece and Portugal. The third step would be to improve and co-ordinate economic policy in all eurozone nations to restore economic growth, ensure that the restructured debts can be serviced and that another crisis does not occur. By blocking the first two, Germany has guaranteed the failure of the third.

Why then has Ms Merkel so blatantly contradicted her own stated policy?

The initial judgment was that she did not understand economics, or was too beholden to longstanding monetary traditions, or was simply incompetent. But as the crisis has intensified, Ms Merkel has become ever more stubborn in her refusal to do what is obviously needed to save the euro, as David Cameron discovered last week. So a different interpretation of her behaviour must now be considered. Is it possible that, far from trying to save the euro, Germany actually wants to break it up? A clear historical precedent is the sabotage of the European exchange-rate mechanism (ERM) in 1992. And the institution that now seems to be working to destroy the euro is the same one that organized the ERM break-up: the Bundesbank.”

Third and last point, the most remarkable part of Rinke’s article-manifesto is what was actually left unsaid: namely that, to the extent that his description of EU governance process in a time of emergency is indeed an accurate one, it strongly resembles the functioning of the Bismarckian Reich (1871-1918) in ordinary times.

Though nominally a league of equals (like the EU today), the 27 member German Reich was in fact dominated by Prussia. The Prussian prime-minister doubled as Reich chancellor and Bundesrat chairman (like Merkel today), and Prussia’s control of one-third of the Bundesrat votes gave it a veto right (like Germany and its Mitteleuropa allies today). Below Prussia came three kingdoms of lesser importance (Bavaria, Saxony, Wurtemberg) - like France, Britain and Italy today; then a bunch of principalities, duchies, free cities, - like the smaller EU states today. Elections to the Bundestag were through universal suffrage (like the EU parliament today) and, as a federal union, the Bismarckian Reich was actual rather flexible, since the main members were allowed to retain control of their armed forces (like in the EU today).

By the standards of the time, the Kaiserreich was overall a “modern” institution. In his treatise on The State (1889), none other than Princeton political scientist Woodrow Wilson was full of praise for the German Reich, which he put on a par with America and Britain. For Wilson, the one country that seemed to follow a Sonderweg was not the German Reich, but the dysfunctional French Republic.[17] Under Bismarck (1871-1890), the Kaiserreich was actual a status quo power (like the EU today). It is only after Bismarck’s departure that Wilhelmine Germany became a revisionist power, and it is only around 1917 that Woodrow Wilson started to talk in terms of “Prussian autocracy.”

Be that as it may, in the collective memory of the West today, the Bismackian Reich remains (rather unfairly) associated with “Prussian militarism,” and German commentators today know better than to draw attention to the similarities between the two situations.  Hence the current rhetoric about the need to create a “United States of Europe” – a narrative in which Germany, France and Britain are compared to California, Texas, and New York State rather than to Prussia, Bavaria and Saxony.  But the truth remains: while Prussian preponderance in the German Reich of 1871 was somewhat greater than German preponderance in the European Union today, the difference is one of degree, not of kind. 

Demographically as well as economically, Germany today is one third larger than either France or Britain. In the various EU institutions, Germany’s preponderance since 2000 has been reflected both quantitatively (Germany has the largest representation in the EU parliament and is the main beneficiary of the “double majority system” in the EU Council) and qualitatively (the European Central Bank is a clone of the Bundesbank and its “one size fits all” policy benefits mostly Germany).  All the measures taken in the past two years, from the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) to the European Semester and the Euro Plus Pact, have one thing in common: they have given Germany greater weight in the EU decision-making process.

Since October 2011, the EU is becoming a two-speed Europe: on the one hand, the 17-member eurozone are creating parallel structures; on the other hand, the 10 members remaining outside the eurozone (including Britain, the second largest contributor to the EU budget), who are fast becoming second-class citizens.[18] What will it be, ultimately: a 27-member Reich, or a smaller, 17-member Reich? The funny thing is that even this question is eerily reminiscent of the 19^th century debate over Grossdeutschland vs. Kleindeutschland.

As of this writing (November 2011), there are two things that are not negotiable for Germany. On the one hand, the status of the European Central Bank must not be amended (except for - increased representation for Germany on the Board). One the other hand, the EU treaties must be amended.  The power play is a bit too transparent.[19]

How determined are German elites to push their federal agenda?  So determined that they are already talking about changing the 1949 German constitution itself if need be in order to accomplish this goal.  At the time of reunification in 1989, the Basic Law was considered one of the two symbols of national pride (along with the Deutschmark), and a change of constitution was barely considered. What a difference twenty years make! Today, even though the Basic Law has served Germany well in the past 60 years, the growing perception is that it was imposed by the Allies in 1949, it was not ratified by a referendum at the time, and it now stands in the way of Germany’s reassertion on the international stage (and it is indeed a fact that - by design - the executive power of the German Chancellor is not nearly as strong as that of the French President or the British Prime-Minister).

Officially, of course, the rationale for changing the 1949 Basic Law is that, in 2009, the German Constitutional Court, while approving the Lisbon Treaty, imposed limits on the further transfer of sovereignty to Brussels in several policy areas ranging from security to fiscal and social policy.  According to Der Spiegel, Merkel and Schauble have a two step plan for the reform of the European Union. As a first step (which could be concluded by the end of 2012), a change in the EU treaties that would put “notorious debtors” among the 17 eurozone members under mandatory supervision by Brussels.  As a second step, Merkel and Schäuble want the European Union to move towards becoming a federation, preferably at 27 but, if not possible, as a two-speed Europe in which a 17-member federal core would constitute an avant-garde:

“This entails transferring more sovereign rights to the EU -- and it would mean amending Germany's constitution. This could either be accomplished under Article 23, requiring a two-thirds majority in Germany's federal parliament, the Bundestag, as well as the Bundesrat, the upper legislative chamber that represents the states. A more challenging alternative would be to change Article 146 of the constitution via the direct participation of the population. According to this scenario, the Germans would drop the Basic Law and embrace a totally new constitution.”[20]

According to Spiegel again, “constitutional experts have devised a solution that is already being fleshed out in detail at government ministries in Berlin.”[21] So here we are: as a first step, Germany would focus on getting more weight in a federalized core Europe at 17; as a second step, Germany would change its own constitution and so as to give greater power to the German chancellor. The net result? A stronger German Chancellor who, by the same token, would become a stronger “EU Chancellor.” [22]

Listening to the German public conversation with the proverbial Freudian “third ear,” it is hard to avoid drawing the conclusion that German elites have become slightly unhinged. On the one hand, they are stubbornly refusing to turn the European Central Bank into a U.S.-style Federal Reserve, even though it is urgently needed (and even though they claim to pursue a “United States of Europe.”) On the other hand, they are willing to change a Basic Law that has served them well in order to implement a project that is neither objectively needed, nor subjectively desired by the rest of Europe or, for that matter, by German public opinion itself (as of 2009, only 25 percent of Germans were in favor of a federal Europe).

As Daily Telegraph columnist Ambrose Evans-Pritchard puts it: “Having followed the German political scene closely for the last five months, it is clear to me that almost the entire German political establishment is out of its depth, ideological, sometimes smug, apt to view the EMU debt-crisis as a Calvinist morality tale, and lacking in deep understanding of what it has got itself into.”[23]

The more Angela Merkel repeats her “more Europe, not less Europe” mantra, the more Europeans are reminded of Bismarck’s famous mot:  “I have always found the word "Europe" in the mouths of those politicians who wanted from other powers something they did not dare to demand in their own name.”  In fact, one gets the sense that, in the German collective psyche, the full “normalization” of Germany will not be achieved until the post-WWII constitutional order is overturned, the semi-sovereign Bonn Republic led finally to rest, and that this imperative takes precedence over any other considerations. As one shrewd observer puts it:

“It may be unfair that Germans are now forced to spend their hard-earned money on helping out Italy and Greece. But that just doesn't make it rational for Germany to let the European economy go up in flames. The inability of Merkel and her colleagues to realize this basic point demonstrates how confused German foreign-policymakers now are about Germany's past and present interests… German politicians of the postwar era were masters at pursuing Germany's self-interest even as they talked about noble ideals. German politicians today have naively taken their predecessors' rhetoric at face value. Disgusted by a submissiveness that never actually existed, they have grown determined to be more assertive. As one leading member of the FDP, the small liberal party that is part of Merkel's governing coalition, insisted: "For once, we've got to show that we're capable of saying no." In that spirit, Germany's leaders are talking up a storm about their country's self-interest even as they gamble away the economic livelihood of their own citizens.

A transformed Germany now threatens the stability of the euro, and indeed the future of the European Union itself. But the reason is not just that the new Germany has grown more selfish. If Germans were simply acting rationally, they would bail out the euro. The problem, rather, is that the leaders of the new Germany are so mired in an overreaction to the past that they have become blind to their own self-interest.”[24]

If over-reaction to an imaginary past is the first component of German irrationality today, a second component could well be the tension between West Germans and East Germans, twenty years after what the former call “reunification” and the latter “annexation” (Anschluss).  As recently as 2010, the country was evenly split (48 percent yes, 47 percent no) on the question of whether the two halves of the country are growing together as one nation![25] While in economic terms, Germany is the healthiest state in Europe today, on the cultural front, Germany comes across as the “Sick Man of Europe.” Is Germany such a “split” nation that the only way for Germans to feel like “ein volk” is to actively try to become hated by the rest of the continent?

Between Wanderlust and Weltpolitik

The third component of German irrationality has to do with the future. Even as the country was spending more than 2 trillion dollars rebuilding the East, Germany has managed to remain the world’s second-largest exporter after China. By all accounts, it is an impressive performance. But it seems that, in the process, Germany has caught what could be called the “Turkish disease.”  Just like Turkey today thinks of itself as the Germany of the Middle East, Germany is tempted to fancy itself as the “Middle Kingdom” of Eurasia.

Among the various trial balloons and calculated gaffes that came out this year, the most revealing is without contest the 16-page “The New German Question : How Europe Can Get the Germany it Needs,” written by Ulrike Guerot, the head of the Berlin branch of the Soros-sponsored European Council on Foreign Relations (ECFR).  After decades of exasperating German Kantian cant, the fiery rhetoric of the red-haired Valkyrie of the German foreign policy establishment is actually a breath of fresh air.

The Bonn Republic is dead, get used to it, Guerot argues unapologetically. The Berlin Republic that replaced it may appear to some Europeans observers as “increasingly evasive, absent and unpredictable.” In fact, Germany is not so much experiencing a temporary bout of Wunderlust as it is embarking on a revisionist attempt to develop a Weltpolitik:

“Germany is revising each of the four pillars of European integration (the Franco-German relationship, the role of the European Commission, the disproportionate influence of small states, and Germany’s willingness to pay more without getting more formal power)… Germany is breaking free from its reflexive Atlanticism and revising the role it has played within the post-Cold War security architecture…While Germany is increasingly assertive in promoting an economic policy for the European Union, it refuses commitment on pressing foreign policy issues such as Libya, and increasingly charts its own relationship with China and Russia.” [26]

For political, economic, and even generational reasons, euroskepticism has lately become “chic” among German elites and public opinion alike, with 63 percent of Germans having little or no confidence in the EU. Since an increasingly euroskeptic German public opinion is tempted to “go global alone,” Guerot argues, it all boils down to this: either it will be a unilateral German Weltpolitik; or, if Europeans are smart enough to “hug Germany close” rather than form coalitions that could one day be used to “balance German power,”  it can become a German-led European Weltpolitk.

As if that was not clear enough, Guerot singles out the Anglo-French entente cordiale as the main stumbling block:  “Some commentators argue that the EU could function with a German-led economic policy and an Anglo-French foreign policy. But it is neither realistic nor desirable to assume that Germany, an economic hegemon with global commercial interests, would limit itself to the role of a bystander on foreign policy issues.”

What makes Guerot’s paper so interesting is that, alongside analysis and advocacy, it also offers a revealing pot-pourri of all the frustrations of the German foreign policy establishment in general, and its paranoid view of Anglo-French relations in particular. Thus, according to Guerot, the same states which, on a variety of low-politics issues, “bandwagon” with Germany, do not hesitate, on high-politics issues, to “balance” against Germany:

“In fact, coalitions of member states are already forming against Germany as well as around it. For example, although the Franco-British defence deal was about saving capabilities in the two big defence spenders, it has been seen in some quarters as a way for France to diversify its political base in Europe…”

What’s behind this particular animus against France and Britain, you wonder? For one thing, the French-British entente cordiale of November 2010. For another, the Libyan affair of March 2011.

To all Western analysts, the most puzzling development this year concerning Germany is Berlin’s decision to side with China and Russia (and the BRICS in general) over Libya in the UN Security Council. There is of course a quasi-official, detailed, and perfectly plausible, explanation for that: Chancellor Merkel and her staff believed that a major country like Germany would have to actually participate militarily if it voted in favor of the resolution and, since they were more than skeptical on the chances of the operation, Germany preferred to abstain.[27]

One could argue that when, like Germany, you are seeking a permanent seat at the UNSC, you better get on board any operations decided by your allies, irrespective of your misgivings. But it apparently did not cross the mind of German leaders that a rather spectacular abstention vote would jeopardize their candidacy in the eyes of its Western allies (and that, in itself, only proves that Germany is not quite ready for diplomatic prime-time).

But there is also an unofficial explanation. For decades now, the three Western permanent members of the Security Council (US, UK, France) have formed a discreet, but cozy, directorate known as the P-3.  In January 2011, Germany began its two-year term as a rotating member of the Security Council and, according to one account, was “shocked, shocked, shocked” to discover the existence of this directorate (which had not bothered Germany the least during its previous stint at the UNSC in 2004):

“Even prior to the Libya vote, Germany had become aware that even its closest allies were not willing to grant Berlin a special role. The Germans wanted to be involved in preliminary discussions among the French, British and Americans, as the Security Council veto holders established their position for future sessions. But Berlin was coolly and decidedly rebuffed. Instead, the Western powers merely promised to keep Germany informed. Indeed, from the perspective of New York, German influence is extremely limited. A different hierarchy prevails in the UN than in the European Union, even among the Europeans. The Germans and the French are the closest of partners in the EU; at the UN it is Paris and London. The veto powers enjoy a special status. From their standpoint, the Germans are still novices in international politics. For the French and the British, there is no reason to support Germany's petition to join their club.”[28]

What is not clear from the Spiegel account, though, is whether Germany was kept out of non-Libya related P-3 meetings (which would make sense), or whether Berlin was also kept out of Libya-related discussions – which would be more questionable, given the status of Germany as one of the four “key allies” in NATO.[29] Be that as it may, Berlin decided to retaliate by siding with the BRICS over Libya, and did not realize until later that you just can’t behave in the geopolitical 15-member UNSC the same way you did the year before in the geo-economic G-20. As a result, the Obama Administration has pointedly “abstained” from endorsing Germany’s candidacy for a permanent seat while endorsing the candidacy of other countries.  

Ostpolitik or Finlandization?

Today, at the risk of simplifying, one could say that what Germany wants from France and Britain is, so to speak, less P-3 and more EU-3.  For Guerot at least, the French-British entente cordiale gives too much importance to geopolitical cooperation with the US at the global level, and not enough to geo-economic cooperation with Germany over Eurasian issues:

“[European] critics saw the approach to Russia of [Chancellor] Schröder … as economically-driven appeasement. [But] although business deals remain a key part of the picture under Merkel, the relationship has become more balanced and German diplomacy towards Moscow has at times been very creative.  For example, at the Meseberg summit last year, Berlin proposed a strategic dialogue between the EU and Russia, but made it contingent on Russian help in resolving the Transnistrian conflict. However, these approaches have too often not been sufficiently embedded in a common European approach…

…The momentum of a future CFSP will depend on the approaches of the big three. France and the UK have a common responsibility to integrate Germany instead of reverting to a Franco-British entente cordiale. One way to do this would be for the European External Action Service (EEAS) to issue a new strategic White Book for Europe, helping to recreate a new strategic community in which German interests are mirrored in a wider European strategy that clearly goes beyond trade issues…it is important for Europe’s big states to revisit the dysfunctional European security arrangements and find ways of engaging Germany in a European attempt to re-craft relations with Russia, Turkey and the countries in between.”

Bluntly put, Germany wants Britain and France to give legitimacy and support Germany’s Ostpolitik toward Russia. The problem is twofold:

On the energy front, Germany’s Russia policy is rapidly leading to an energy “Finlandisation” of Europe. Germany has favored Russian schemes over the EU-sponsored Nabucco pipeline, and Berlin’s recent (and unilateral) decision to abandon nuclear activity makes Germany more dependent than ever on Russian energy.  What makes German policy all the more dangerous is that, if the alternative for Europe on the energy front was to become a choice between, so to speak, Islamization by the Middle East or Finlandization by Russia, Europeans would be “naturally” inclined to chose the latter and follow Germany’s lead (if only because the Russian people don’t emigrate en masse to Europe.)     

Then there is the “creative” Meseberg issue. Without prior consultation in the EU or NATO, German chancellor launched the Meseberg initiative with Russia in May 2010, ostensibly aimed at resolving the least important problem in Europe today (the status of Transnistria). As Jamestown Foundation veteran analyst Vladimir Socor warned three months later:

“The German government can gain added weight for its own Russia policy by embedding it to some extent in a European framework. As part of this policy, Berlin seeks ways gradually to accommodate Russia into decision-making processes of the European Union and NATO…Germany is moving incrementally from special relations to strategic cooperation and sector linked economic integration with Russia. Outrunning EU-Russia relations, Germany seems positioned to initiate security arrangements of the EU with Russia, separately from the United States and NATO, and potentially reducing the relevance of both…

The document proposed by Chancellor Angela Merkel, and finalized by her with President Dmitry Medvedev during their meeting at Meseberg Castle near Berlin on June 4-5 (Meseberg Memorandum) is the seminal document for this process (www.bundesregierung.de, June 5). The document proposes creating an EU-Russia Political and Security Policy Committee, to be chaired by the EU’s High Representative for Foreign Policy Catherine Ashton and Russia’s Foreign Affairs Minister Sergei Lavrov, for high-level consultations and decisions. The committee’s mandate would include “setting ground rules for joint civilian and military crisis management operations by the EU and NATO,” as well as “working out recommendations on various conflicts and crisis situations, to the resolution of which the European Union and Russia may contribute within appropriate multilateral forums.”

On these definitions, the EU-Russia Committee would be vested with greater powers than those of the NATO-Russia Council. It would also institute an EU-Russia policy coordination mechanism, such as the EU does not have with the United States or with NATO (despite the overlap in EU-NATO membership). Thus defined, the committee can open access for Russia to the EU’s own decision-making process (without any influence from the EU on Russia’s decisions). It could also inspire Russian demands for access to NATO decisions through the NATO-Russia Council.”[30]

“Chermany” versus “Chimerica”?

Germany is the world’s second largest exporter after China. Since last year, German growth has been largely driven by exports to China itself and, since last year as well, German investments in China have actually overtaken German investments in France.

In the geo-economic mind of German elites, the world of the future is best defined as a tripolar world: China, America, Germany. As Germany’s behavior in the G-20 last year showed, the idea in Berlin is that the tug-of-war of the century might well pit “Chimerica” against “Chermany.”   

As it now stands, Guerot argues, the world is “increasingly governed by a G2 of the US and China,” and Europe needs a global strategy. Germany has pondered the fate of Japan, which failed to regionalize its China policy in time, and now finds itself isolated. It’s now Europe’s turn to realize that “when Berlin is responsible for 45 percent of EU trade with China – the most significant of the emerging powers – will it take lessons from the other 26? Obviously not (sic). But would Germany benefit from a common European stance to China? Probably yes…” 

Guerot is certainly right to point out the dangers of letting China take a divide-and-rule approach vis-à-vis Europe:  “The number of [European] countries seeking a united and assertive political and economic approach is in fact shrinking. Even countries that were in favour of a tough economic strategy, such as Spain, Portugal, Greece and Poland, are now giving up the fight on sensitive issues such as anti-dumping or market access for public infrastructure projects. In 2010, the EU began to develop a better strategic approach to China based on reciprocal engagement, but this was undermined by the vulnerability of peripheral member states to Chinese “bond diplomacy”. Unless member states get much better at coordinating their China policy very quickly and learn how to use their leverage (for example, China’s need for advanced technology), there is a danger that they will be picked apart.”

In fact, in a much-discussed report published this summer, Guerot’s ECFR colleague Francois Godement has drawn attention to the ongoing “Scramble for Europe” on the part of Beijing:

“China is now in effect applying to Europe’s periphery a set of strategies and tools that has paid off elsewhere in the developing world. China has long dealt bilaterally with countries in Africa, the Middle East and Latin America while paying lip service to regional institutions. It emphasises “mutual benefit”, friendship and forms of assistance that go to the heart of local elites, builds up a chain of influence that extends from transport (ports, airports, roads) to local assembly (with designated Chinese industrial parks) and logistics (China’s sea, air and container companies, telecoms networks) and eventually to distribution (from small-scale traders who form a sizable portion of Chinese immigrants to large distribution firms working up the value chain).

Europe is now beginning to experience the same approach as China buys or builds infrastructure projects, snaps up ailing companies or collects assets from quasi-insolvent states, gets a foothold in the distribution sector and uses local media to increase its soft power. China has particularly focused on the Mediterranean and south-eastern member states most in need of Chinese cash. This has created new relationships between peripheral member states and China. For example, Portugal, Italy, Greece and Spain now represent 30 percent of Chinese investments and trade facilitation in Europe, and Central and Eastern European countries another 10 percent – a disproportionately large amount given the overall size of their economies. The danger for Europe is that there will be a kind of “China lobby” of smaller member states within the EU. Even after 2014 – when a majority decision at the European Council will require 15 member states with 65 percent of the population – China could depend on some of them – particularly Cyprus, Malta and Greece.”[31]

But though the threat of an economic take-over of Europe by China is real, Guerot fundamentally mistakes the symptom for the disease: if Club Med countries are increasingly responsive to Chinese “bond diplomacy,” it is because they have no other alternative since Germany refuses to turn the ECB into a lender of last resort.  That’s the first problem with Germany’s China policy.

There is another problem: China’s “need for advanced technology” is growing indeed, but it is not limited to German high-speed trains, and includes military technology. As it happens, Germany has become Europe’s leading arms exporter. As Hans Kundnani himself concedes:

“Arms exports have always been a kind of blind spot in the Federal Republic’s “civilian power” identity.  Although it had rejected the use of military force as a foreign-policy tool and liked to think of itself as a Friedensmacht (force for peace), it continued to sell weapons throughout the post-war period. .. According to the Stockholm International Peace Research Institute (SIPRI), Germany is now the third largest exporter of major conventional weapons after the United States and Russia, with 11 percent of the global market in the last five years compared to 7 percent for France and 4 percent for the UK. Thus while Germany spends less on defense as a proportion of GDP than France or the UK and contributes less to operations like the ISAF mission in Afghanistan, it sells more weapons than they do. Moreover, as European governments make defense cuts, more of those weapons are sent outside of NATO.[32]

Since the Berlin Republic now defines itself almost exclusively as a “geo-economic power,” there is no doubt that the first priority of a German-dominated EU China policy would be to lift the arms embargo in place since 1989.  American taxpayers would thus continue to provide for the defense of the “civilianized” Germans (who spend only 1.3 percent of their GDP on defense) while Germany would be making money selling advanced military technology to America’s peer competitor.

France’s Counter-Offensive

In the past two years, French elites have not been as strident as their British counterparts. As paradoxical as it may sound, the German offensive has in fact, so far, brought France some “relative gains” (as they say in game theory). First, in recent years, the German-French “engine,” which had worked well in a six-, nine-, or twelve-member Europe, had become increasingly “contested” in a 27-member Europe; the financial crisis has helped the “engine” recover its centrality (even though France is now in a junior position). Second, while Germany’s goal is ultimately inimical to France, the emergence of the Merkel Method has had, for the time being, the advantage of weakening an EU Commission which, in the eyes of the French, had become too powerful anyway. Third, Sarkozy has been able to leverage the crisis to warn French public opinion that, if they don’t drink their castor oil now, Mutti Merkel and the Bundesbank Bruders will come to Frankreich later – and yes, they have “vays” of making you drink.

The French reaction to Germany’s power play in the past two years has been so complex that a thorough analysis would require another article. Suffice it here to say that, in November 2011, in an unusual departure from established French diplomatic practices, the outgoing French Ambassador to Germany, Bernard de Montferrand, published a book (apparently based on a report to the Quai d’Orsay) entitled France-Germany: The Moment of Truth.[33]

Much of Montferrand’s book is actually taken up by the contrast between the growing “convergence” of French and German societies in the years 1945-2000, and the French “decrochage” (i.e. the reform gap and the resulting loss of competitiveness) in the past decade.  In short, for French officialdom, it would appear that the ten-year-old reversal in the correlation of forces (France the horse vs. Germany the rider) is not the sign of an irreversible decline, but of a temporary aberration.

Wishful thinking? Not necessarily: as French public opinion is reminded at regular intervals by the French media, if current demographic trends hold, France will be the most populated country in Europe by 2050 – ahead of Germany. When it comes to making babies, the French remain terribly competitive (it gives a whole new meaning to the concept of levee en masse) and France appears well positioned to win a demographic “war of attrition” against Germany in a generation.

But quantity alone won’t do the trick; qualitatively, the French also have to become more “German.”  That’s the message of Montferrand, and that was also the message of President Sarkozy in a recent Strasbourg speech. True, a “Travail, Famille, Patrie” rhetoric, however justified it may be in present circumstances, is rather risky when you are a self-proclaimed Gaullist, have presidential elections in five months, are low in the polls, and your opposition (both left and right) is accusing you of having conceded too much already.   

But Sarkozy’s concessions to Merkel so far have been in fact largely tactical, and mostly reversible. His main priority in the short-term is to get Merkel to agree to make the ECB the lender of the last resort (like the U.S. Federal Reserve). He might well succeed, if only because the markets are now turning against Germany itself and, once they start scrutinizing the German books, they may find out that, as the economic journal Handelsblatt pointed out in September, Germany’s real debt is actually more than twice the size of the official debt. For short-term tactical reasons, Sarkozy might even agree in principle in the coming months with the idea of amending the Treaties; in the long-term, though, the end result will probably not be significantly different from what they have been during Germany’s two previous attempts.

Though ostensibly written for a French audience, Montferrand’s book is also an indirect reply to the Guerot Manifesto, written in the best diplomatic (read: “coded”) tradition.  In that respect, two “messages” are worth mentioning:

1) While today as twenty years ago, France remains open to the idea of intergovernmental, variable-geometry, “enhanced cooperation” scheme in whatever domain, France remains as opposed as ever to the idea of a federal union (at 27 or 17). In short, between the British idea of “network” and the French idea of “maillage” (through enhanced cooperation), there is only a difference of degree; between these two and the German idea of a “core,” there is a difference in kind. Germany is after supranational political union, which would require revising the EU treaties; France and Britain would be happy with intergovernmental enhanced cooperation, which would not require a revision. While German’s minimal objective is a two-speed federal Europe, France and Britain, by contrast, are in favor of a multi-speed confederal Europe (the only significant source of friction between France and Britain appears to be the so-called Tobin tax, supported by both Paris and Berlin, and to which London is perhaps too dogmatically opposed ).[34]

2) While there are plenty of foreign issues on which greater cooperation between France and Germany is possible, they apparently don’t include Russia and China since, on these issues, Montferrand is either non-committal or conspicuously silent. What the French diplomat goes out of his way to demonstrate, though, is that the possibility, raised by Ulrike Guerot, of a “non-aligned Germany” is simply not realistic. End of that discussion.

Ever since German reunification, France has tried to co-lead EU domestic affairs with Germany and co-lead EU foreign affairs with Britain. But the game is becoming harder to play for three reasons: 1) the euro is no longer what hides, but what reveals, German strength and French weakness; 2) Germany and Britain are on a collision course, and Germany and Russia are on a collusion course; 3) Sarkozy has to play on a three dimensional chessboard (the global markets, Germany, and French public opinion) with three increasingly diverging operational tempos.

In contrast to the time of the two previous German power plays, there is one genuine new development: France no longer seems to believe in the possibility of turning the current Europe-Espace into an Europe-Puissance. The French will no doubt continue to pay lip service to the idea of a European defense, but mostly in order to protect the defense industrial base of Europe.

France is a half-continental, half-maritime, power and, for centuries, its foreign policy has oscillated (often a contretemps) between Europe and the High Seas. When the colonial French Union unraveled in 1958-1962, French elites began to single-mindedly focus on a future European Union as a substitute “force multiplier.”  With the unexpected reunification of Germany, the dream of turning Europe into a Greater France came crashing down in 1989. For the past twenty years, France has often looked like a country that had “lost an empire and not yet found a role” (to paraphrase Dean Acheson on post-WWII Britain). There are signs now that a fifty-year long continental cycle of French foreign policy is coming to an end, and that the French are turning their gaze towards the High Seas once again.

Part of this rebalancing has of course to do with the fact that Europe has become a Greater Germany. The more Berlin flexes its geo-economic muscles on the continent, the more Paris tries to compensate by showing a renewed activism on the global geopolitical front. But part of it has also to do with the growing French realization (left and right) that the geopolitical future could well pit the Rest against the West, and that, within this “Defense of the West” paradigm, France has more in common with les Anglo-Saxons than with the rest of Europe.  It is therefore no coincidence if France reintegrated NATO in 2008 and entered into a major military partnership with Britain in 2010.  

At the core of France’s grand strategy today, there is first and foremost the P-3 (US, UK, France) at the global level.[35] Ideally, Paris would not mind supplementing it at the regional level with a G-3 (France-Germany-Russia) – if only to prevent the rise of a German-Russian condominium over Eurasia. But Berlin is adamantly opposed to turning the existing German-Russian tete-a-tete into a ménage a trois. Lastly, the French remain open to the possibility of turning the existing French-British entente cordiale into an EU-3 (Germany, France, Britain), but not on German terms, as Montferrand’s book makes it clear.

“Too Big for Europe, Too Small for the World”?

Far from solving anything, the reunification of Germany in 1989 has re-opened the German Question. In spite of all the attempts in the past twenty years to create a “European Germany,” the old continent has never been more a “German Europe” than today. As Ulrike Guerot rightly puts it:  “European “normality” was based to a large extent on West German “abnormality”. Now that the reunified Germany is becoming more “normal”, it is undermining European “normality.”

As early as 1997, U.S. economist Martin Feldstein had warned that, far from being the solution, European Monetary Integration (EMU) would only aggravate conflicts both within Europe and between Europe and America.[36] Is it Germany’s curse to be “too big for Europe, too small for the world,” as the old saying goes? Is it really a systemic problem, or only a statecraft problem? Surely, there’s got to be a way Germany can find its well-deserved “place under the sun” without wrecking everything in the process. At any rate, it is time for Washington to step in and remind Berlin that regional coercive diplomacy is one thing, global financial brinkmanship, quite another. 

Copyright Tony Corn 2011