The Paradox of German Power

"This was published in 2014, in the wake of the eurozone crisis, the first phase of which came to an end in 2012, with Mario Draghi’s famous ‘whatever it takes’ statements. Merkel was pretty much the key figure throughout the process. What the book tries to do is to explain the way that German power worked in the course of the eurozone crisis by drawing comparisons with Germany’s position in earlier phases of European history. The ‘German question’ that tormented 19th-century European statesmen after unification in 1871 was in effect settled by Germany’s defeat in two world wars and its Cold War division. The book argues that the eurozone crisis saw it re-emerge in new form, economic rather than military: a fresh example of the old adage of a country that is ‘too big for Europe, but too small for the world’. That was the dynamic that you saw play out during the eurozone crisis. Germany was a semi-hegemonic power. It was not in a position simply to impose its will on the rest of the eurozone, but it was the largest and richest country inside the EU and no decisions could be taken without it. The Germany we saw emerge through the eurozone crisis was a geo-economic power in a way that it hadn’t necessarily been in the past. Traditionally, inside Europe, you’d had France providing a lot of the political energy and Germany providing the economic power, but not wanting to leverage that into political hegemony. That was a dynamic that shifted a little bit in the eurozone crisis. It became very clear that France and Germany were not equals. That was even manifested in the slightly tricky relationship that you had between Merkel and Nicolas Sarkozy, who was the French president. And although Germany was committed to the euro, not least because it suited its world-beating exporters, it was unwilling to make the grand gestures that a genuine hegemon might make to allow it to thrive, notably committing to common debt. So you got chaos, uncertainty, mistrust and, in southern Europe, a lot of pain. Get the weekly Five Books newsletter At the same time Germany was increasing its economic heft in the rest of the world. A very important dynamic was emerging between Germany and China. It was a very nice, harmonious relationship, where China, as a rapidly growing economy, had a desperate need for the sorts of things that German manufacturers were very good at producing and exporting. The debate around this has really come back in the last couple of years. There was this notion, encapsulated by the German phrase Wandel durch Handel , which means ‘change through trade’, that as non-democratic powers grew richer through trading with democracies like Germany, they would naturally liberalise. You’d have the emergence of a middle class, which would go on to push for democratic reforms in places like China. Therefore Germany could both engage and deepen its trading relationships with countries outside of Europe, while at the same time foster the growth of liberalism and democracy inside. That’s obviously an extremely self-serving narrative, but it worked very, very well for Germany. But it’s increasingly questioned now, as it’s become very clear that China has not liberalised and is not democratising as it has become integrated in the global trading system. Essentially, it has become harder for Germany to cloak its economic interests in the normative language of politics. In fact, I’m sceptical about the extent to which that was ever believed in Germany, as opposed to simply being a nice way for a country that didn’t really want to do geopolitics to tell itself that it was doing geopolitics, while at the same time seeing its own companies getting rich on the back of growing markets in China and elsewhere. Either way, this slightly diverted German attention away from the rest of Europe as European markets became a little bit less significant as a share of Germany’s overall trade. At the same time, it was a political priority for Germany to be able to hold Europe together. It was very common to say that the eurozone was not going to emerge intact from the eurozone crisis, that Greece was not going to be able to put up with the austerity that was being demanded of it, or that the Germans would force them out of the euro. And, indeed, Wolfgang Schäuble, who was Merkel’s finance minister at the time, wanted to chuck Greece out. Merkel overruled him. In the end, the eurozone did hold together. In fact, it’s even grown by a couple of members since then. The lesson that we might draw from that is that some people perhaps didn’t pay sufficient attention to how strong the political will was, especially inside Germany, to hold projects like the single currency together. In spite of the brutal treatment meted out to countries like Greece, and the awful austerity, and in spite of some terrible decisions, the project held together. Angela Merkel was at the heart of all of those decisions, and it was important to her that the eurozone remained intact. One of her more famous sayings was that if the euro fails, Europe fails. She weighs her words very carefully. That was a strong signal that she was not going to let the eurozone fall apart because holding the EU together is a core national interest of Germany’s. But it was also going to ensure that the pain of adjustment would fall on the shoulders of others. We’ve just celebrated—if that’s the right word—20 years of eurozone notes and coins. Although it’s not necessarily the most robust currency area in the world, it looks rather more stable now than it did when we went through the crisis. We’ve had some interesting developments, that Merkel assented to, such as the agreement in 2020 to establish a widespread recovery fund financed by common EU debt. Merkel had said she would never agree to that. So we’re in an interesting place now compared to 10 years ago. I think that is, to a certain extent, down to the political commitment that Merkel and Germany demonstrated in holding the eurozone together, albeit at great and lasting cost. The first phase of that is something that is charted in this book."