Why Germany Will Never Be Europe’s Leader

(Bloomberg Opinion) -- The timing is certainly awkward. The year 2020 was supposed to be the moment for Germany to show leadership, as it takes over, on July 1, the rotating presidency of the Council of the European Union, analogous to an upper house in the EU’s legislature. But now a virus has come along and thrown the world and the EU into chaos. As other European nations ask it to take charge and show solidarity, Germany appears to be balking.

The Covid-19 pandemic is thus a tragic rerun of last decade’s euro crisis. Back then, it was above all the Greeks who were angry at the tightwad Germans, even drawing Hitler mustaches on posters of Chancellor Angela Merkel. Today, it’s primarily Italians and Spaniards who are livid.

The Germans, for their part, are once again nonplussed about why others are so upset. During the euro crisis, Germany participated in rescue programs even though the EU treaties prohibit bailouts. That made Germans feel generous. Now they are again helping the EU to send bags of money to the countries most ravaged by SARS-CoV-2. It’s also true that Germany is today saying no to “coronabonds” — a form of mutualized European debt — exactly as it rejected “euro bonds” back then. But as the largest paymaster of the EU’s other institutions, German cash is still going where it’s needed, and Germans feel they ought to get credit.

This mutual miscommunication is a potential time bomb that could one day blow up the European project. It reflects both a design flaw in the EU and a deficit in German political consciousness. That’s because the EU is an inchoate bloc. To keep working, it needs a benign leader, or hegemon. And only one country is economically and politically (though not militarily) powerful enough to play that role.

In Germany itself, this “hegemony debate” began in 2012 with an essay by a German professor, Christoph Schoenberger. In international relations, a hegemon isn’t a power that dominates others with brute force. Instead, it’s a country that uses its power to preserve a larger system, even at a cost to its more narrowly defined national interests — by being a lender of last resort, for example. Britain was the hegemon during the gold standard era of the 19th century. The U.S. was hegemon in the Bretton Woods system after World War II.

In the same way, Germany should accept that it’s the hegemon of the euro area and the EU, goes one argument. But there’s a problem. European integration began in the 1950s, just after a barbaric German war of aggression. From the start, European institutions were built so that no country, especially not Germany, could ever dominate the others. So, for example, Berlin contributes 21.44% of the capital of the European Central Bank, but has only marginally more clout on its Governing Council than Malta, with 0.09%. In the European Stability Mechanism, the EU’s rescue fund, Germany has enough weight to block decisions but not to make them. And so on.

The practical workaround during much of the past six decades has been a sort of joint hegemony by Germany and France, sometimes called the European “tandem” or “engine.” France, in this partnership, was meant to keep the southern members happy, Germany the northern and eastern ones, so the EU as a whole could move forward. This Franco-German division of labor has all but broken down. That’s in part because the two countries have different interests. But France also has too little financial firepower to be co-hegemon.

So the search for a European leader again points to Germany. The problem is that the country’s public is dead set against this role. On the political left, Germans cite their dark history and argue that Germany must subordinate itself to its community of neighbors rather than be seen to steer them. They often quote the writer Thomas Mann, who feared a “German Europe” and hoped for a “European Germany.” It doesn’t help that the German word for “leader” is Fuehrer.

On the political right, Germans worry about the design flaws in the EU institutions I mentioned above. These make the Germans financially liable without giving them corresponding and proportionate control or supervision. Hence their obsession with “moral hazard,” lest Italians spend money guaranteed by Germans, while Germans have no sway over Italian policy. The nightmare of conservative Germans is a “transfer union” in which their tax euros keep disappearing in the bottomless pit of the south, sapping Germany’s industrial vigor.

A solution to this dilemma would be to give the euro area and the EU a proper government, with its own tax revenues and budget powers. Germany would then be just the largest contingent in a new entity, a bit like Virginia in the nascent U.S. Such a bold step might have been conceivable under a europhile chancellor like Helmut Kohl. But that was another era. Nobody today, in Germany or in the 26 other EU countries, is ready for such a leap.

And so the German establishment keeps up its rhetorical acrobatics, vaguely calling for “more Europe” without defining what that means or providing the money to make it happen. In practice, the Germans are the same as the fiscally hawkish Dutch and Austrians, except slightly more diplomatic because they know everyone’s watching them. As in the euro crisis, Germany will keep doing just enough to prevent the single currency’s outright dissolution, but never enough to cure its maladies.

This week I gave Schoenberger a call, to hear his thoughts eight years after he launched the hegemony debate. What’s changed since 2012, he told me, is that today the tensions are greater and the resources scarcer, so that somebody must lead: “Either the Germans do it, or nobody does it, and then the structure collapses.”

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andreas Kluth is a columnist for Bloomberg Opinion. He was previously editor in chief of Handelsblatt Global and a writer for the Economist. He's the author of "Hannibal and Me."

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.