Atlantic Sentinel

Tag: Germany

  • German Ideological Revival Polarizes Western Politics

    “Now Europe speaks German,” declared Volker Kauder, a member of Germany’s ruling conservative party, in late 2011. Despite the scolding he earned for his remarks, he was only slightly off. Not only Europe, indeed the world speaks increasingly with a German voice. Not literally, of course, but philosophically. German ideas are emerging as powerful forces all around the globe, ringing the bell for the end of the Anglo-Saxon moment in history.

    Critics and defenders of contemporary capitalism in the United States both speak the language of German history. Those who seek to emulate the European welfare state regularly invoke the German model while those who condemn these leftist ideas emphasize the necessity of self-reliance and labor as the fundamental glue of society and the indispensable source of individual dignity.

    The irony of this debate is that while the former claim to be ideological descendants of Karl Marx, it is the latter who use his arguments in the truest sense. For Marx, labor was the essence of human existence. Men could only be men through work which enabled him to interact with nature and create a world according to his imagination. (more…)

  • Germany’s Merkel Dominates Preelection Polls

    When German voters decide the new composition of the Bundestag in the fall of this year, one thing seems almost inevitable: Angela Merkel will remain chancellor, unless all three parties left of center agree to form a coalition government of their own.

    Although the scenario seems highly improbable, Merkel will be presented with a tough choice of her own. While it is too early to put too much faith in opinion polls, the current numbers are startling: Merkel’s conservatives are consistently breaking the 40 percent mark while the Social Democrats led by Peer Steinbrück can barely meet 30 percent of voter approval.

    But Merkel’s present coalition partners, the liberal Free Democrats, are caught in a battle for political survival, failing to meet the necessary 5 percent mark to be represented in parliament in almost every poll. In recent weeks it has become clear that the Christian Democrats are already taking the possibility of a new coalition partner into their calculations, showing a dwindling support for the liberals in upcoming provincial elections. This strategy is painful for the liberals but makes sense from Angela Merkel’s point of view. Why rely on a razor’s edge majority on the right when a more comfortable margin could be reached with the Social Democrats or the Greens? (more…)

  • Eurofighter: The Great German Backstab

    As David Cameron’s now infamous veto of a treaty for greater fiscal integration in the European Union, the leaders of France and Germany bonded closer, overcoming to a large extent their difficult personal chemistry.

    Thousands of kilometers away in India, this realignment coincided with the victory of the French-made Dassault Rafale in India’s Multi Role Medium Combat Aircraft (MMRCA) contest. The emerging schism which the tantrum was symptomatic of, had already begun to play out in India.

    The MMRCA contest has been India’s biggest fighter contest of this century, worth about $20 billion or $60 billion if spread out over the next thirty years. It coincided with a similar quest for a new fighter jet in Japan.

    The Eurofighter also participated in both contests. Italy and Spain, junior partners in the joint fighter project, took a backseat while Germany took the lead in India (unusually, given that the British are much more familiar with it) while the British were given charge of the Japanese campaign (again, unusual, since the Germans consider themselves to have penetrated the Japanese psyche more). (more…)

  • Berlin Consensus Redefines European Union

    Europe is at a crossroads. The European model is failing and the Brussels Consensus seems to be at an end.

    Until now, Europe was managed through careful compromise, centrism was the rule and social democracy the means.

    The Brussels Consensus consisted in economic deregulation coupled with environmental and social caveats, all bungled together with an agreement in promoting human rights worldwide.

    This consensus has been at the base of the acquis communautaire (“common body of law”) subsequently reflecting itself in the Copenhagen criteria for accession to the European Union and the Maastricht criteria for economic harmonization.

    The consensus was the result of decades of negotiation and compromise between, fundamentally, France and Germany.

    In 1957, the Rome Treaty was signed giving way to the Coal and Steel Community and Euratom, after Paris and Berlin had agreed to allow West Germany into the European community of nations politically and economically but protecting in the process the French steel industry which would have underperformed under free-market competition with Germany.

    Decades later, with a much enlarged EU, the method was still the same: in the negotiations for the Maastricht Treaty and the Treaty of Amsterdam, French agriculture was protected through subsidization and the Deutsche Mark formed the basis for the euro currency in return for the permission to reunify the two Germanys.

    The construction of Europe was political. Angela Merkel referred to it in her Brugge speech as the “Union method,” a hybrid between Jean Monnet’s gradual federalist “community method” and the pure and classic “intergovernmental method.”

    Whenever an exception emerged against the consensus, there was an immediate ostracizing reflex by the community as a whole. Britain was often sidelined in spite of its economic and political importance and this tendency eventually came to be institutionalized as the opt out mechanism. The British faced difficulties even joining the European Economic Community and remain to this day outside of the euro area group.

    Weaker countries such as Austria saw themselves ostracized diplomatically when they elected politicians (anti-immigration far-right leader Jörg Haider) from outside of the politically correct ideological spectrum and elections for the European Parliament were even more blatantly affected by this trend with candidates for the Barroso Commission being pushed away due to their ideological convictions (anti-gay rights Rocco Buttiglione).

    In essence, Europe’s social democracy run system depends on a political compromise over most matters with dissenting voices being unwelcomed. However, Europe’s current tribulations are economic rather than political and they seem to require a clear radical and stark choice: more integration or none at all.

    The maintenance of the euro is untenable according to many economists. Long-term sustainability is threatened by the partial financial integration process of the seventeen currencies which saw interest rates harmonized but not the labor market, where the European Central Bank fights inflation and capitals are free to move across borders but economic policies are still run separately. This gives rise to too many externalities and distortions and cannot be maintained.

    The problem now is that the Brussels Consensus of political compromise as a solution for all problems is insufficient to handle the crisis.

    Germany has been living in paradise being able to import basic agricultural products and cheap manufacturing goods making use of its strong currency but exporting back high end technology and industrial products which bring it greater comparative returns. There is nothing wrong with a semi-protectionist policy so long as international integration is not at stake. But Berlin cannot on one hand uphold “cohesion policies” aimed at streamlining development in Europe and on the other maintain a constant positive commercial balance.

    Chancellor Merkel still lives in the past though. The “fixes” being applied to the Greek economy are nothing but band aids and will not solve Greece’s structural problems.

    The other Mediterranean states look at Greece and are alarmed at how badly the lab rat is doing. They will push for a different agenda. Germany will have to eventually make an unpopular choice — escape forward or escape backward.

    For the moment, Merkel is trying to escape making such a choice and keeps hoping to jump start the Greek economy but this populist stance deprives her of statesmanship. Angela Merkel is no Margaret Thatcher, even if her political career may turn out to be longer. It may be difficult, and even implosive for Europe, to generate a Berlin Consensus but in this case it seems to be more urgent to try and fail rather than not act at all. Ultimately, as a closet Euroskeptic, Chancellor Merkel simply lacks the political courage to give federalist elites in Europe a fatal diagnosis.

    In the meantime, while Europe does not sort out its internal shortcomings, European power projection abroad will remain feeble and the Europeans will continue to be ignored in the most pressing issues of today’s international scene.

  • Eurobonds Thwarted by German High Court

    José Manuel Barroso, president of the European Commission, announced last week that the European Union’s executive body would soon release a report on the issuance of eurobonds. Joint sovereign bonds for the nations of the eurozone could help stem Europe’s escalating debt crises. It would provide funding for countries that have been cut off from the market and virtually guarantee the solvency of countries at risk, including Italy and Spain.

    The announcement seems an attempt on the part of the commission to direct decisions away from individual states toward the political process of the EU. As the crisis has developed, the central forces have been Germany and France, Europe’s two largest economies. Although their leadership role allows decisions to be made quickly, it has also generated a sense of disorder as there has not been a clear understanding as to who is ultimately responsible. Equally, the EU has failed to provide a clear unified voice during the crisis, exacerbating market uncertainty.

    While political decisions that relate to the whole of the union should undoubtedly have the consent of those they affect, Germany is in a position of power. As the strongest economy in the eurozone, the sentiment of the government in Berlin will decide whether there is or isn’t a eurobond. (more…)

  • Eurobond Faces Major Obstacles

    Without appearing too philosophical, it may be safe to state that the economic and political choices currently facing Europe’s leaders are those of choosing a future identity.

    With the debt ceiling troubles in the United States and the unconvincing resolution to the European debt crises, markets have moved dramatically the last few weeks. As the share prices of core euro banks are losing a large amount of value and the cost of sovereign debt has increased spectacularly, there are grave concerns over the current outlook. There are questions of how long the euro can muddle trough without forcing a drastic change in its whole economic and political structure. As George Soros said in an interview recently, “financial markets have a very safe way of predicting the future. They cause it.”

    The pressure from markets have a number of consequences for the countries most affected. Outside of the fad of so-called austerity economics, the countries most in need of running deficits are, due to markets current risk aversion, unable to do so. This not only hinders their ability to take advantage of automatic stabilizers that in downtimes smoothen demand and reduces the pressure of unemployment; it also takes away the choice of stimulating the economy which could make the contraction and the structural changes that are necessary to emerge from it less painful.

    For a more technical and immediate problem, the pressure recently put on France may reduce its credit rating. If that there were to happen, the AAA rating of the European Financial Stability Facility, which derives its funding from eurozone countries and thus its creditworthiness from them, may be at risk, possibly increasing the cost of funding for the vehicle.

    With uncertainty in the markets and the immense pressure sovereign debt is currently under, the proposition of a so-called eurobond has been recommended from a variety of sources. The eurobond would be a financial vehicle backed by the entire euro area. As such, instead of each country auctioning its debt and paying the interest markets supply to them, all countries would use the same vehicle to finance deficit spending, thus paying the same price.

    This was practically a reality prior to the 2007 financial crisis when peripheral countries were able to borrow at close to the same price as Germany. Interest rates for countries as Greece, Ireland and Portugal rose sharply in the wake of the financial turmoil when markets began to worry that they might not eventually be able to pay back their debts. These countries, in fact, teetered on the brink of bankruptcy and had to be bailed out by their fellow eurozone nations.

    Since most countries in the single currency area are economically stable, a eurobond would enable the least competitive among them to receive funding from the markets, substantially lowering the costs for countries that are currently in trouble.

    There are objections of the sort that a eurobond, much like when the Germans replaced their mark with the euro, is to sacrifice the benefits of a prudent economy, and possibly not only raising the cost of their own borrowing, but effectively subsidizing the economies of southern countries at their expense. This would create a moral hazard where peripheral economies, loath to implement structural reforms, would be able to borrow on the good credit of others.

    While an abstract objection, none of the more serious propositions of how a eurobond would be structured resemble that description. Most suggestions have come up with ways to embed into the bond tools that would enforce the fiscal rules of the Stability and Growth Pact that few countries have ever lived up to, including Germany and France.

    One particular suggestion would see the creation of “blue” and “red” bonds, whereby the blue bonds backed by all euro countries could only be issued up to an amount equaling 60 percent of GDP — a safe amount of debt to handle. Red bonds, by contrast, would not be backed and cost more. This would encourage countries to keep the size of their debt within limits as the interest rates on red bonds may well be punishing.

    No matter the potential structure of a eurobond, there are two great obstacles. Under the Maastricht Treaty, which created the eurozone, subsidizing other euro countries is effectively forbidden as it would disrupt the “systems competition” envisaged by the currency’s founders. They wanted to incentivize countries in the single currency area to pursue structural changes in their labor laws and entitlement programs so as to remain competitive. Amending the treaty would be highly undesirable given the enormous strain imposed on European governments by past treaty revisions. Considering present circumstances however, this may not be the most pressing issue.

    A more urgent problem is the resolute German resistance to eurobonds. The German attitude reveals not only a resistance to the risk of having to pay more to borrow but calls into question the future of the currency union. As far as Berlin is concerned, the eurobond is a question for future generations. Before it could become reality, there has to be a higher degree of economic and political integration first.

    There are signs that this is indeed what will follow from a recent meeting in Paris where Chancellor Angela Merkel and President Nicolas Sarkozy announced that they would work to harmonize tax rates between their countries and urge fellow eurozone governments to meet regularly to coordinate fiscal policy.

    Some see this as the emergence of a core euro bloc that is integrating at a more rapid pace within the European Union. This could ultimately mean two tiers of eurozone members — a stronger middle, run by Germany and France, and those countries that are currently on life support who would be kept out of the integration process until they are ready.

    While the energy displayed by Merkel and Sarkozy is commendable and shows that the euro area has the political will to find a solution that both reassures and deals with its democratic deficit, one wonders how long the currency union can muddle trough without implementing major reforms that would calm the markets.

  • After Libya, Europe’s New Order in the Making

    For all his blunders, George W. Bush may forever be remembered for vindicating the notion of the “coalition of the willing.” Until the world wars, all military alliances were in fact ad hoc and it was only the messianic Western prejudices that followed the defeat of absolutism in World War I, fascism in World War II and communism in the Cold War, that temporarily deluded the Western masses into thinking that an “alliance” should have a noble, morally righteous connotation.

    The campaign to oust Colonel Muammar Gaddafi’s regime in Libya started as a simple ad hoc coalition led by Paris and London. Only later did it become embroiled in international politics with the likes of Rome and Berlin seeking to exercise some moderation by forcing the British and the French to accept NATO leadership and a subsequent bureaucratization of the intervention into inefficacy. (more…)

  • The Ants and the Grasshoppers

    The advent of new governments in many countries around the world during the first decade of the twenty-first century brought with it strategic indefinition. The reason is found in small systemic revolutions that some of these newcomers represented in terms of geopolitics. In such countries as Brazil, Japan and Turkey, the newcomers had been away from power for decades. Thus the elections that swept them into office were practically regime changes.

    The priority given to the worn out promise of “change” made foreign policy departments a prime target. Whereas during the Cold War ideological alternatives were available for different political factions, nowadays the primacy of the free-market model and of the Washington Consensus make alternative governance difficult. As a result, the perception of policy making is largely dependent on symbolism instead of substance. Hence, social conservatism and liberalism are being used as a political platform rather than economic policy. (more…)

  • Merkel Finds Growing Partner in India

    She came and conquered quietly.

    Understanding the significance of shifting geopolitical relations in the world, particularly the rise of Asian giants, the German chancellor came to India with a “look east” policy followed by many of the European nations in the recent years.

    Although Iran not allowing the chancellor’s plane to overfly the country made the news, what’s far more interesting is that Germany is prepared to deepen both trade and cooperation in the area of nuclear technology with India at a time when it is itself shutting all nuclear reactors in the wake of the accident in Fukushima, Japan in March. Altogether, Germany and India are expected to boost bilateral trade up to €29 billion next year.

    While European countries are struggling to recover from the global economic downturn, improving ties with rising powers as India is a sure way of maintaining their influence across the developing world. Superior European technology will find a market in India which is growing fast and investing in research and development.

    India has at the same time come to realize that with increased trade, it can expand its leverage in Europe as part of its quest to acquire a bigger role in international politics.

    Apart from bilateral issues, Germany and India affirmed their commitment to United Nations Security Council expansion or reform to include more than the current five permanent member nations. Germany and India would both like to wield veto power permanently. India, with its huge population and booming economy, may have a slight edge over Germany although the latter could encounter fewer resistance from Britain, France and the United States.

    Angela Merkel’s visit coincided with a minor drift in Indo-Russian relations as Moscow intends to play a greater role in Afghanistan once American and NATO troops pull out. Germany’s experience, having fostered stable relations with Russia despite considerable political and strategic differences, could be a lesson to India as it has to cope with Russian assertiveness in Central Asia.

    In conclusion, it is safe to assume that India’s role as a great power will only be amplified in years to come, whether it ascends to permanent Security Council membership or not. Under Merkel’s leadership, Germany appears to recognize that likely trend as well as the need of courting India in order to maintain a favorable balance of power in the world.

  • European Navies Train for Coastal Warfare

    In September, the navies of thirteen nations gathered at the port of Turku in Finland for Exercise Northern Coasts 2010, a two week training event meant to “improve the interoperability between participating units and countries with main emphasis on maritime operations in confined and shallow waters,” according to the Finnish military. The event was tailored for “smaller naval units, such as fast patrol boats, corvettes, small frigates and Mine Counter-Measure Vessels,” Warships International Fleet Review reported. (more…)