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The Germans have taken a lot of abuse in recent months for not being willing to do more to halt the European crisis (either by using its own finances to backstop everyone else’s, or by encouraging the ECB to fight the fire with a spray of money).And it’s obvious that the Germans are getting increasingly irritated by being portrayed as the villains in all this (Just look at the illustration in the German newspaper Handelsblatt).
But a new meme is emerging, which might be characterised as the backlash to the anti-German backlash.
In the FT, Gideon Rachman writes: “We isolate and overload Germany at our peril. The demands being placed on Germany are ‘unrealistic.'”
Consider just one of the proposals on the shopping list: a Europe-wide bank deposit insurance scheme. As a senior Dutch politician who shares the German view, puts it: “We cannot push through a banking union when the French have just cut their retirement age to 60 and we have raised ours to 67.” From the Dutch and German point of view, it is unfair for their citizens to underwrite the banks of countries using their own money to pay social benefits that are more generous than those on offer in Germany or the Netherlands.
This dilemma illustrates why a relatively technical-sounding exercise such as bank-deposit insurance has profound implications for national sovereignty. Once you take a big step towards the mutualisation of debt across Europe, you are forced towards much deeper political union. It is not just the much-discussed need for a European “minister of finance”, with the power to override national governments. To avoid bitter disputes over fairness, you would also need to harmonise European social-security systems. That would be the work of decades.
The noise from Germany suggests that this is indeed the crux of the issue.
Konstantin von Hammerstein, Christoph Pauly and Christoph Schult, writing in Der Spiegel, a reliable outlet for German thinking, write:
Listening closely to Chancellor Angela Merkel in recent weeks has revealed just such a change in tone. It has been a careful shift, extremely nuanced. But it has become clear that her well-known melody is now a new one.
“We need a so-called fiscal union,” she said during an appearance on German public broadcaster ARD last week. “Which means more joint budgetary policy.” Up to that point, Merkel had merely repeated that which she always demanded. But then came the new tone: “More than anything, we need a political union,” she said. “That means that we must, step by step through the process, give up more powers to Europe as well and allow Europe oversight possibilities.”
Merkel is carefully preparing the public for the possibility that great changes are coming and that established certainties are no longer valid. Her message is that Europe only has a future when the Germans too give up large portions of their national sovereignty. That is the extent of her message, but it is plenty nonetheless.
It’s not ridiculous to think that for the Eurozone to work, countries will have to keep trading political sovereignty for fiscal stability. Basically everyone knows that, and it was always kind of the goal from the beginning. The problem is the timing. Banking flights happen overnight. Political integration takes place over years or decades.
(Via Frances Garrett)
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