Over the last few weeks, as Greece has edged closer to leaving the European single currency, there has been much speculation about the different positions of German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble. Schäuble, who is generally thought to be more “pro-European” than Merkel but has paradoxically taken a tougher line towards Greece, is usually said to believe the single currency can only succeed if everyone abides by the rules. Merkel, on the hand, is said to worry about more the geopolitical costs of “Grexit”, particularly in the context of Russian revisionism since the annexation of Crimea in 2014. Others speculate that the difference between the positions of Merkel and Schäuble is merely tactical: a good cop/bad cop routine in order to extract concessions from Greece.
However, I’m starting to wonder whether Schäuble may not just be more willing to countenance “Grexit” than Merkel but may actually want it. In the cover story of last week’s Spiegel, he is portrayed as believing that it could actually be good for the European project – not just because it would relieve the single currency of its most troublesome member but also because it would force the remaining eurozone countries to deepen integration in order to reassure the markets about the sustainability of the single currency. In particular, it is hoped, they would agree to a common deposit insurance scheme, which Germany has so far opposed. Thus “Grexit” would propel the European project forwards – just as, according to Schäuble, the euro crisis has already “advanced” the European project.
This approach would make sense as a “two-level game” of the kind Robert Putnam describes. Putnam begins his famous 1988 paper, “Diplomacy and domestic politics: the logic of two-level games”, with a description of how Chancellor Helmut Schmidt used an international summit in 1978 to overcome domestic opposition and push through a fiscal stimulus programme. Similarly, Schäuble would be using the Greek crisis to achieve steps in European integration to which he is personally committed but that neither Germany’s increasingly Europsceptic public nor Merkel (yet) supports. In the article in the Spiegel, Schäuble is quoted as saying in private that “crises are opportunities” – an implicit reference to Jean Monnet’s dictum that “Europe will be forged in crises”.
It may seem fantastic to suggest that Schäuble might not be just using crises but actually trying to create them in order to “forge” Europe. But, as many others have observed, it does seem to have been German policy over the last five years to maintain the pressure on the eurozone’s debtor countries to undertake structural reform. The idea that Schäuble may even see “Grexit” as an opportunity is also confirmed by former US Treasury Secretary Timothy Geithner, who, in his memoir, Stress Test, describes a conversation he had with Schäuble on the island of Sylt a few days after European Central Bank President Mario Draghi’s promise to do “whatever it takes” to keep the euro together in the summer of 2012. According to Geithner, Schäuble told him many Europeans saw Grexit as plausible or even desirable – “it would be traumatic enough that it would help scare the rest of Europe into giving up more sovereignty to a stronger banking and fiscal union. The argument was that letting Greece burn would make it easier to build a stronger Europe.” “I found the argument terrifying,” Geithner writes.