The Need to Think Bigger

Trying to steer Europe through its current challenges has been compared to open heart surgery. Keeping the patient alive while fixing the problems is risky. And the patient must have confidence in the surgical team that they know what the problem is.

Germany may be the chief surgeon, but it is in a serious debate with other Europeans about the diagnosis. Meanwhile, the patient is on various forms of life support while the arguments continue.

Nowadays confidence seems to be a rare commodity at multiple levels in Europe. Citizens have doubts about their national leaders’ ability to manage the challenges and threats racing toward them. They have even greater doubts about their leaders’ ability to forge a consensus across the European Union on what ails the continent.

Germany is still confident that its assessment of the problem is correct. Unsustainable levels of debt, rampant corruption (at least in the case of Greece), and a lack of competiveness are all closely linked problems. They are the cancers that need to be removed. Ultimately, the disease is the result of morally reckless behavior, and the patient can only be saved if he himself finds the moral fiber to redeem his actions. A recent op-ed in the Washington Post by foreign minister Guido Westerwelle spelled out the cure. There was a mix of bitter medicine and therapy along with rehabilitation, which can last for years. But overall, according to Westerwelle, the heavy lifting has to come from member states themselves. Too much solidarity would kill incentives to implement structural reforms and abandon the road to perdition. Germany’s strategy of providing just enough solidarity to give weaker euro zone member countries enough time to enact reforms is therefore still seen as the best way forward. Greece is almost perceived as a dangerous annoyance. It provides excuses to all those countries not entirely serious about getting a grip on their debt problems and doing what is necessary to regain competitiveness.

It’s therefore not surprising that Westerwelle praises the structural reforms some EMU member states have undertaken, and he encourages them to stay the course. His message to euro zone member countries is simple: be patient and virtous, endure the pain. He adds: “The experience in Germany, Poland and the Baltic states indicates that they will succeed.” Unfortunately, this fatherly empathy is unlikely to stem the rising anti-German tide across the continent and the Atlantic. In fact, it could even have the opposite effect. Politically, as the election results in Greece and France have shown, resentment against the German approach to the crisis has already claimed a number of victims. While polls show that Germany might be admired for what it has achieved over the last several years, most Europeans still do not want to become German.

Overall, Westerwelle’s grand plan for growth—although intentionally kept wrapped in vague generalities—is more revealing about underlying German attitudes toward the crisis than it is about practical solutions. The German government is merely trying to rebrand its austerity-driven approach and give it a different name. Let’s just take a look at a few facts.

  • As Westerwelle points out, it is true that Germany underwent its own process of structural reforms. It is also true that this adjustment was not painless. But Westerwelle seems to forget that it would have been far more painful if most of the other European countries had undergone the same adjustments at the same time as Germany. Cutting back in lockstep would have dragged the euro zone economy into a steep and long recession, and Germany would have been forced to deal with unemployment levels well above the high mark of 5 million it reached in the past decade. Instead, while Germany was reforming, it chose to ignore the strict budgetary rules contained in the Stability and Growth Pact. In addition to that, the rest of the continent kept on buying German products (true, in large part with borrowed money). A relaxation of budget constraints and the credit-driven shopping spree in the periphery partially offset the adverse effects of German reforms. Essentially, Europe provided a large credit-driven stimulus to German companies.

Many experts now argue that the time has come to return the favor. They have a point. The problem is that a slightly more ebullient German consumer would be more likely to stick to buying German rather than foreign-made products.

  • Westerwelle says that European funds could help struggling euro zone economies. There is no question that EU structural and cohesion funds could be better used to stimulate growth. However, the money that could be freed up is only a drop in the ocean. Nobody, not even the Germans, thinks that European structural funds have the potential to spur growth in countries currently mired in a steep recession.
  • Westerwelle sees a growing role for the European Investment Bank. Indeed, the European Investment Bank should be recapitalized and could help fund specific projects across Europe. However, the EIB cannot substitute a malfunctioning banking system in a country as big as Spain.

None of what Westerwelle is proposing will have the desired effects unless larger issues are addressed, such as some form of euro bonds (whatever name they are given), banking integration (through a euro zone-wide deposit insurance, a centralized bank resolution authority, and direct injections of capital into failing banks through the European Financial Stability Facility and the European Stability Mechanism), and a new institutional architecture of the European Union. In the absence of these steps, or at the very least the commitment to address these weaknesses, the crisis of confidence will continue to destabilize Europe. It is disingenuous to pretend that the current turmoil is only the result of a debt-crisis compounded by a lack of competitiveness in a number of peripheral economies or domestic corruption. What we are witnessing is a deep political and institutional crisis.

Westerwelle missed the chance to spell out what is really needed and why bolder steps must be taken. What he says is not necessarily wrong, but it is simply not enough. If he, his boss, and other euro zone leaders continue to be tempted to look at polls to find the answers, they will fail. Polls reflect too many contradictions and encourage inaction—as the latest findings of the Pew Institute point out, most Europeans don’t love the euro, but want to keep it. They understand that the project has flaws, but don’t want more sovereignty to flow toward Brussels. Just like the Greeks, most Germans want to keep the euro but not pay the price. Attempts to devise solutions based on all these contradictory messages are like trying to square a circle. Just as the Greeks must realize that membership in the euro zone comes at a price, German politicians too have an obligation to finally tell their citizens some hard truths about the necessary sacrifices.

Without the hard truths, the doctor will only continue to treat the symptoms and not the disease, thus failing to save the patient. It is pretty pointless to remove a cancer if the patient’s heart is failing in the meantime.

The views expressed are those of the author(s) alone. They do not necessarily reflect the views of the American Institute for Contemporary German Studies.

Alexander Privitera

Alexander Privitera is a Non-Resident Fellow at AICGS. He focuses primarily on Germany’s European policies and their impact on relations between the United States and Europe. Previously, Mr. Privitera was the Washington-based correspondent for the leading German news channel, N24. As a journalist, over the past two decades he has been posted to Berlin, Bonn, Brussels, and Rome. Mr. Privitera was born in Rome, Italy, and holds a degree in Political Science (International Relations and Economics) from La Sapienza University in Rome.

Jackson Janes

President of AICGS

Jackson Janes is the President of the American Institute for Contemporary German Studies at the Johns Hopkins University in Washington, DC, where he has been affiliated since 1989.

Dr. Janes has been engaged in German-American affairs in numerous capacities over many years. He has studied and taught in German universities in Freiburg, Giessen and Tübingen. He was the Director of the German-American Institute in Tübingen (1977-1980) and then directed the European office of The German Marshall Fund of the United States in Bonn (1980-1985). Before joining AICGS, he served as Director of Program Development at the University Center for International Studies at the University of Pittsburgh (1986-1988). He was also Chair of the German Speaking Areas in Europe Program at the Foreign Service Institute in Washington, DC, from 1999-2000 and President of the International Association for the Study of German Politics from 2005-2010.

Dr. Janes is a member of the Council on Foreign Relations, the International Institute for Strategic Studies, and the Atlantic Council of the United States. He serves on the advisory boards of the Berlin office of the American Jewish Committee , Beirat der Zeitschrift für Außen- und Sicherheitspolitik (ZfAS), the Robert Bosch Foundation Alumni Association, and the American Bundestag Intern Network (ABIN) in Washington, DC. He is a member of the Board of the German American Fulbright Commission and serves on the Selection Committee for the Bundeskanzler Fellowships for the Alexander von Humboldt Foundation. He is a member of the Cosmos Club in Washington DC.

Dr. Janes has lectured throughout Europe and the United States and has published extensively on issues dealing with Germany, German-American relations, and transatlantic affairs. In addition to regular commentary given to European and American news radio, he has appeared on CBS, CNN, C-SPAN, PBS, CBC, and is a frequent commentator on German television. Dr. Janes is listed in Who’s Who in America and Who’s Who in Education.

In 2005, Dr. Janes was awarded the Officer’s Cross of the Order of Merit of the Federal Republic of Germany, Germany’s highest civilian award.

Education:
Ph.D., International Relations, Claremont Graduate School, Claremont, California
M.A., Divinity School, University of Chicago
B.A., Sociology, Colgate University

Expertise:
Transatlantic relations, German-American relations, domestic German politics, German-EU relations, transatlantic affairs.