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.
At a discussion I had with Stephen Green and Quentin Peel at Chatham House recently, a member of the audience put it to me that German policy in Europe was normal for a creditor country in a debt crisis. In particular, he suggested that it was playing in a similar role in the euro crisis as the United States did in the Latin American debt crisis in the 1980s. “The thinking in Berlin is no different from the thinking in Washington during the Latin American debt crisis”, he said. It was an interesting point, which prompted me to think more about the similarities and differences between the two crises and between the role of Germany in Europe and creditor countries in other debt crises. It is also relevant to the question of the relationship between ordoliberalism and neo-liberalism, which I discussed in my previous post.
One of the things that has persistently puzzled me over the last few years is the disconnect between the Anglo-Saxon and German debates about the euro crisis. The mainstream view among Anglo-Saxon economists is broadly Keynesian: they see surpluses as a problem as well as deficits and therefore argue it is not only debtor countries that need to adjust. But the only German economists you hear making such arguments are those such as Heiner Flassbeck who are perceived as being on the far left. (Flassbeck was the state secretary in the German finance ministry during the short-lived tenure of Oskar Lafontaine at the beginning of the Schröder government. Lafontaine subsequently left the German Social Democrat party and became one of the leaders of the Linke, or Left party.) It seems as if, in this respect, Germans are to the right of the Anglo-Saxons.
There are multiple ways of looking at the euro crisis. Northern Europeans in general and Germans in particular tend to look at it as a crisis caused by fiscal indiscipline by southern European countries in general and Greece in particular, who didn’t stick to the rules. Others, particularly in France, look at it above all as a crisis caused by unregulated financial capitalism, which created banks that were too big to fail and therefore had to be bailed out by governments. Others still, particularly in the UK, look at it above all as crisis caused by the flawed architecture of the euro itself – a common currency without a common treasury – which meant it could never work. But if you take an even longer view, it’s also possible to see the euro crisis as the unforseen consequence of German reunification.
At the end of a comment piece I wrote last month for the Guardian website I talked about Germany’s “economic narcissism”. A lot of the comments on the piece focused on my use of the phrase, so I thought I’d try to explain in more detail what exactly I meant. By using the term, I wasn’t simply trying to say that Germany was responding to the euro crisis in a selfish way. It seems to me that, in the end, whether you think Germany is pursuing its own economic interests or the long-term interests of Europe as a whole depends to a large extent on the economic theory in which you believe. By using the term “economic narcissism” what I had in mind was something related but slightly different: the way the debate in Germany about the euro crisis is so inward-looking.
Over the last few months, Germany has been getting a lot of flak. To many observers, the euro crisis has revealed a more inward-looking and nationalistic Germany that is pursuing its national interests more aggressively than before. For example, a couple of weeks ago the philosopher Jürgen Habermas wrote of a “solipsistic mindset” in Germany. In the new issue of the magazine Cicero, which came out yesterday, another éminence grise, the former chancellor Helmut Schmidt, accused Angela Merkel of “Wilhelmine pomposity”. I agree that there is a profound, and in some ways worrying, shift taking place in German foreign policy. But, as I argue in an essay in the July issue of Prospect, which comes out today, it is a complex shift that actually goes back beyond Merkel to the “red-green” government of Gerhard Schröder. I also think the references to the Kaiserreich are a little misleading. If Germany is becoming more nationalist, it is in a quite different way than in the nineteenth century.