Germany, The Fourth Reich?

Suhas Nannapaneni

As the discrepancy between the rich and poor countries in the European Union become ever clearer with the Coronavirus pandemic, one returns to the ever-present question: is Germany the backbone and leader of the EU, or does it use its dominant economic capacity for more self-interested purposes?

One can hardly deny that Germany is the preeminent leader of the European Union. It is one of the many reasons that the United Kingdom has decided to exit the EU. When Britain joined a united Europe, it envisioned nothing more than a free-trading area. Since Britain’s entrance into the union in 1973, the nation has opted out of legislative and regulatory issuances when London refused to transfer its sovereignty to unelected officials of the European Commission in Brussels. Brexit has reissued the question as to what the purpose of the European Union is – either a Europe of sovereign nation-states, or a European super-state.

With this question gnawing at skeptics, if one enters any EU meeting in Brussels, it becomes quickly clear that it is the Germans running the show. Charles Michel, the former prime minister of Belgium, may be the one technically in charge of the European Council, but it is unmistakable that Angela Merkel (who has been chancellor longer than the leaders of France, Spain, Italy, and Poland have been in office combined) is the one with access to all of the levers.

Of course, Germany never endeavors to garner the image of a strong continental power – for obvious historical reasons – but it is undeniable that the single market of the EU has allowed Germany’s economy to prosper efficiently resulting in high exports without worrying about an appreciating currency since it is weighed down by many debtor nations such as Greece and Spain.

The Euro was introduced at the beginning of the millennium to level the playing field of Europe, and to converge prosperity rather than have each country regulate its economy selfishly. However, since its inception the currency has disproportionately helped Germany. In contrast, Italy’s per capita GDP in 1999 was €1,000 above the eurozone average; by the end of last year, it had fallen to €4,000 below average. All the while, Germany has been able to send 40% of its exports to EU countries while importing relatively little. Currently, Germany’s unemployment stands at 4.6% with the EU average being 8.3%, with Spain recording the highest rate at 16.2%.

Yet, during the crisis when many countries look to Germany for aid, Chancellor Merkel has offered little chance for direct relief. When the European Union agreed to create a 750-billion-euro recovery fund, it had been held up by conservative nationalist governments in Poland and Hungary who object to having the money being conditional on observing the EU Concepts of the Rule of Law, a policy that threatens their sovereignty. 

Germany’s attitude of issuing controlling conditions on the European Union monetary policies is reminiscent of the fallout of the Great Recession in the late 2000s. Then, Angela Merkel set out to punish so-called “fiscal miscreants” and those unable to control their banks such as Spain. The chancellor refused President Barack Obama’s request to loosen credit and fiscal austerity. During this difficult period, Merkel issued a stance of everyone for themselves while protecting Germany’s cushy trade surplus with its euro-area partners.

Germany’s control of the EU goes further than its ability to profit from the euro and other EU countries while making much-needed fiscal and monetary assistance contingent on a nation’s willingness to transfer more of its sovereignty to the EU – and by extension, Germany. The recent decade’s immigration influx from Muslim-majority countries has unleased mighty centrifugal forces in Europe. Countries such as Italy, Hungary, and Poland declare themselves incapable and unwilling to handle thousands of African and Middle-Eastern refugees and migrants. In response, Germany sought to block EU fiscal policies to resuscitate Italy’s economy resulting in it sinking into a recession in 2018.

However, the stark alternative available to the nationalist governments of Hungary and Poland does not offer much hope. If in the distant future, the European Union was dissolved over irreconcilable economic differences and a rise in nationalist sentiment (like Brexit), Europe is left with the undisputed leader which can now play the disputes of the now-fragmented European nation-states with selective trade agreements and alliances reminiscent of the Great Power politics that dictated Europe in 17-19th centuries.