Fiscal union

Germany Needs To Get Real

EU-Gipfel in Brüssel
Will Angela Merkel follow French President Emmanuel Macron's lead toward a genuine fiscal union for the EU? Source: Olivier Matthys/DPA

When German Chancellor Angela Merkel announced what appeared to be the next steps for European unity from inside a beer tent recently, many people thought: At last, something is going to happen after all these crises.

It sounded as though Ms. Merkel was responding to the proposals of newly elected French president, Emmanuel Macron, about European policy – at least superficially.

Mr. Macron had not talked about details at first either. But in contrast to the Germans, he does want a genuine fiscal union. This doesn’t mean appointing a European finance minister or setting up a joint investment fund. It means the establishment of well-defined fiscal sovereignty along with the right to issue debt certificates without requesting permission from Germany’s finance minister, Wolfgang Schäuble. A European finance minister would enjoy political sovereignty there.

European emancipation from the US would be a positive development. But it won’t happen under Ms. Merkel.

So the question arises: What kind of fiscal union does Angela Merkel even want? My suspicion is that she hasn’t given serious thought to this issue because she doesn’t believe it will ever come to pass. There are too many obstacles in the way, and not only in Germany. But she wanted to address Mr. Macron’s proposals; otherwise her opponent in the upcoming elections, Martin Schulz, would have done it.

If she was truly serious about more European integration in budget and defense policy, she has had sufficient opportunity to prepare Germany for such a transition. But the opposite has occurred. Germany would not have acted on its own and anchored a debt limit in its constitution. Germany would not have allowed the Greek crisis to go on for eight years without any solution. A discussion wouldn’t have been allowed to arise in Germany during which the European Central Bank was labelled an enemy of the state and where the slanderous phrase – “penalty interest rates” – goes into daily use.

European emancipation from the US, one which included a genuine European economic union, would be a positive development. But it won’t happen under Ms. Merkel. She is pro-European, but only so long as that serves German interests and her own politics. She wanted to prevent the collapse of the euro, but only because that would have weakened Germany enormously. The French have long acted out of similar self-interest, even if they were not quite as successful.

The same is true of defense policy. Germany is hopelessly under prepared in this area. In both economic and security policy, Germany depends on a friendly relationship with foreign powers. There is no Plan B in Germany for an economic policy dealing with excessive surpluses, the logical consequence of which is deficits of the same magnitude in other countries. And there is no alternative plan to NATO. A European defense policy that functions without American support would require increased defense expenditure that far exceeds what Donald Trump has been demanding from Germany. After the country’s exit from atomic energy, Germany would need to enter into atomic-powered defense. And that’s just the start.

If Germany and France could come together in a true economic union, then Germany will no longer be able to act like a little country that grows rich at the expense of the rest of the world. The philosophical basis for such a fiscal union would not necessarily align with what is known as the “Ordnungspolitik” pursued in Germany and Austria; that is a word that cannot be easily translated, because it means something along the lines of: All the institutions, laws and regulations that make it possible to organize an economy according to the principles of the free market.

If Ms. Merkel were serious about a European economic and security union, she would have to come up with a plan that could be implemented in several stages, together with Mr. Macron and other European partners. Just as the monetary union had three phases, an economic union would have to follow a similar script.

But if the European Commission is to be excluded from this process from the start, then once  again we would end up with an unstable solution, formulated under the standard cover of European integration. The resulting European fiscal union would be degraded to a joint investment program from which contributing countries eventually demand their money back. There won’t be more investment.

Instead, existing investments will just be rubber stamped by the new European fiscal union. In terms of defense policy, intelligence agencies will exchange more data and there will be more German-French combined troop units. But there can be no thought of independence from the US.

 

To contact the author: gastautor@handelsblatt.com

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