Who's your daddy? Germany, apparently

 

‘ONE WAY of putting the referendum that I like is that Brussels and Germany are the mother and father of the EU and the rest of the countries are kids. And some kids spend the money wisely but some, like Ireland, spend it on crazy things.

“So the mum and dad keep giving the kids more and more money. But eventually they put their foot down and say, ‘Right, you can keep borrowing our money – if you sign this form to let us know what you’ll use it for.’ ”

This, apparently, is what we’re teaching our kids now – that we are all children, subject to our strict but benign parents in Brussels and Berlin. The words are those of a primary schoolboy, interviewed on RTÉ Radio to mark Europe Day last week.

They tell us how Europe looks to an intelligent Irish child trying to make sense of the world that awaits him.

This is obviously a rather uncomfortable vision for Irish people. But surely it must also be deeply uncomfortable for the Germans.

I can’t believe that most Germans, who know their own history and Europe’s, feel easy with the notion that other countries are being infantilised in this way – and especially that Irish kids are now being taught to think of Germany as a literal fatherland. Haven’t we been here before?

The founding idea of the EU was precisely that no country – and specifically Germany – should ever again be in a position to claim hegemony over Europe. This required an integrated economy that would operate on the basis of equality. And what we’re dealing with now is the potential collapse of that project of economic integration.

The euro was supposed to be the big push towards economic unification. We’re often told now that the assumption behind the euro was that we’d all become more like Germany, but it was actually more reciprocal than that.

As Andrew Moravcsik puts it in a fine essay in the current issue of Foreign Affairs, the gamble was that “the deficit-prone countries of southern Europe would adopt German economic standards – lower price inflation and wage growth, more saving and less spending – and Germany would become a little more like them, by accepting more government and private spending and higher wage and price inflation.”

Since the present crisis erupted, all the focus has been on the failure of one side of this implicit bargain.

The southern economies, and Ireland, didn’t really become more German. But it is equally true that Germany didn’t become more like them.

The idea of integration, with both sides moving towards a common centre, failed from both ends. But the German side of this failure is entirely removed from the dominant narrative.

The result is that we end up with a simple moral tale in which Germany is the good father and the rest of us are delinquent kids.

The problem was there from the start. Jacques Delors, the father of the euro, told Moravcsik after the Maastricht Treaty was signed in 1992 that it was a failure because Germany had succeeded in making the new European Central Bank even more narrowly focused on fighting inflation than its own Bundesbank had been.

Delors saw the absence of provisions for fiscal transfers or bailouts between member countries as a fatal flaw.

If the architect of the single currency knew all of this from the start, why did Europe press ahead with such a flawed project? Because Germany seemed preoccupied for the first decade of the euro with the huge task of integrating the old German Democratic Republic.

It was the Germans, after all, who first breached the Maastricht limits on budget deficits. The problem of a booming German economy that was way out of line with much of the rest of Europe didn’t seem all that urgent.

Yet, all the while, Germany was using the euro to increase its advantages over its fellow members.

Germany’s real exchange rate is 40 per cent below what it would be if it still used the deutschmark. This has made Germany the China of Europe, undervaluing its currency, operating a massive trade surplus and accumulating much more spare capital than Germans are willing to spend – money that, of course, helped fuel the bubble economies of Ireland, Greece and Spain.

It is not accidental that Germany’s trade surplus with other euro zone countries is roughly the same size as the combined deficits of the countries that are now in crisis.

This huge imbalance is still the central issue. In the austerity treaty, the basic idea is that the imbalance will be righted by everyone becoming German. But this is wildly unrealistic: by definition, every country can’t have a competitive advantage over every other. And it also overturns the basic belief behind the foundation of the EU: the idea that no one country should ever have such a dominant position.

A Europe in which bright kids think of their own countries as bold children being chastised by a German father is not the goal of the union. It is w0hat the union was supposed to render impossible.

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