Eight ‘right’ reasons why Chancellor Merkel will relax austerity

Dr Gunnar Beck

As I predicted in the Handelsblatt, Germany’s leading financial daily, Merkel emerged as the clear victor in Germany’s recent elections. It now seems there will be another Grand Coalition with the Social Democrats. Merkel’s popularity is due in no small measure to her management of the euro crisis where so far she has been able to present herself to many Germans as a tough negotiator insisting on strict assurances of tighter budgetary discipline in return for any German money. The truth is that the money is as good as gone but Merkel has profited from the extraordinary political imbecility of her opponents who whenever Merkel reluctantly agreed to yet further concessions to aid the euro, decried her hesitation to say she should have given in long before. Before the election, the SPD was calling for a German-led ‘Marshall plan’ for the euro. The SPD performed poorly in the elections, but their party’s policy on the euro is likely to prevail.  Merkel will soften her stance, and offer more solidarity in return for less and less solidity – not because of the Social Democracts and because post-war Germans, and especially Germany’s political elite, can no longer pronounce the word ‘national interest.’

The reasons for this are many, but in one way or another all relate to: i. Germany’s historical guilt complex, ii. the triumph of short-term calculus over long-term evaluation, and iii. the rise of oligarchic democracy in the West.

First, Chancellor Merkel, like any mainstream German politician, is a convinced pro-integrationist. ‘If the euro fails’, she has said again and again, ‘Europe fails.’ Those words, to the sober-minded, are devoid of logic. Yet, they signify a deep-seated and abiding commitment to EU integration and the single currency, not readily understood outside Germany.  Germany’s political establishment has been committed to ‘ever closer EU integration’ ever since West Germany became a state in 1949. The euro is part of that integration process. Any German Chancellor who would pull the plug on the euro, would be subject to unprecedented foreign political and media criticism and go down in history as a dangerous nationalist who placed narrow self-interest over wider responsibilities, turned his back on six decades of ostensibly consensus–based integration politics, plunged Europe into a long recession, and would get no credit for burying the single currency which never suited Europe. Merkel could probably rely on majority popular support, but, like any other German politician, she could not withstand market turmoil, the lobbying pressure by the financial services and multi-national industrial sectors, or the unprecedented foreign and domestic political and media criticism of the kind not experienced by any Germany Chancellor. Continue reading

Thatcher’s EU Policy: A Personal Perspective

Dr Gunnar Beck

I arrived in this country as a student from Germany very shortly before Mrs. Thatcher resigned as British Prime Minister.

I still remember that much of her party had fallen out of love with her in 1990, that she often came across as obstinate, narrow-minded, and ideologically driven, and that she divided opinion as no other politician I remember. At my college in Oxford she was almost universally and equally disliked by both my Communist and extreme conservative friends, although my college tutor Nevil Johnson whom I respected for his personally often difficult but impeccable moral rectitude, greatly admired her.  I have since had the opportunity of listening to many of her public pronouncements on the N. Ireland conflict and the miners’ strike, much of which struck me as lacking in compassion, sometimes crude, even inhumane at times. Many people  consider that her entire economic policy had disastrous social consequences and devastated entire regions of Wales, Scotland and Northern England. Continue reading

The Communautaire Predisposition in the judicial reasoning of the Court of Justice of the EU – A Review of The Limits of Legal Reasoning and the European Court of Justice by Gerard Conway, Cambridge, CUP, 2012

Dr Gunnar Beck

Gerard Conway’s thought-provoking study starts from the familiar distinction between the familiar two broad types of judicial interpretation: the literal or originalist versus the purposive or teleological approach. The Court of Justice of the EU, Conway argues, relies on the second type to a greater extent than most other courts. More specifically, he demonstrates that the Court of Justice has shown a marked tendency towards a meta-teleological approach by which the Court is less concerned with specific objects and aims of legislation or specific treaty provisions but refers to the purposes of the EU treaty order at a very high level of systemic unity. This has favoured and enhanced the tendency toward further integration and harmonisation in Union law.

Conway does not commit himself to the view that the Court adopts a markedly different approach from most others courts in all, or even most cases; rather the Court’s meta-teleological approach has been most evident in a relatively restricted number of key cases concerned with the division of competences between the Union and Member States, which have had a disproportionate and absolutely crucial effect on the development of Union law. Through the development of a de facto doctrine of precedent the Court has reproduced and entrenched the key principles laid down in these fundamental ‘constitutional’ cases throughout the entire body of Union law. As a result, it has driven the borderline between Union and national law far more deeply into the realm of national competences than many of the original founding fathers, or at least the signatories, of the Treaties might have anticipated or than many of the peoples of the EU would voluntarily endorse if they were given the choice on the scope and limits of EU law in their own jurisdictions. Continue reading

The Euro subsidises German industry but it harms Germany

Dr Gunnar Beck

Those who argue that Germany has profited from the euro, almost always rest their case on Germany’s export surpluses. The euro eliminated exchange rate risks; appreciated less than the Deutschmark would have, and thus doubly aided German exports. But has the euro benefited German exports, and does this mean it benefited Germany?
Between 1998 and 2011, German exports grew by 117%, according to the German Statistical Office. German exports rose most – by 154% – to the rest of the world; by 116% to non-euro EU members; and least of all, 89%, to other eurozone members. In 1998, the eurozone accounted for 45% of all German exports; in 2011 that share had declined to 39%. These trends are continuing. The eurozone for German goods and services remains very important to Germany’s export trade, but it is not the motor of growth. Besides, German exports were performing well under the Deutschmark, and Sweden which is outside the eurozone and thus did not benefit from currency stability within nor from alleged low price exports to other markets, recorded export growth which, proportionately, significantly surpasses German exports growth.

Nonetheless, German exports have grown considerably, and the euro probably benefited, not harmed, German exports. German export growth, however, did not translate into economic growth.  According to Eurostat, during 1998-2011 Germany grew at an average annual rate of 1.4%, compared to 1.7% for France, 2% for the Netherlands, 2.8% for Sweden, 2.1% for Britain, and average growth of 1.8% for the EU as whole. Germany also lagged significantly behind the United States at 2.2%. From 1998 to 2011 only Japan, Italy, Portugal and Greece performed worse than Germany. This is not the performance of a euro-winner.

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The German Constitutional Court no longer takes itself seriously, but Germans still believe in the Bundesbank

Gunnar Beck

As I predicted in the Wall Street Journal in July and discussed earlier in the week in the Asia Times, the German Constitutional Court last week deferred to the German government and approved the ESM Treaty subject to minor qualifications. Since the judgment the markets and politicians throughout the eurozone have been in jubilant mood. Even the German ambassador in London lost his guard when, in an interview with the Guardian newspaper, boasted that there was no other country in the world where ‘all but one political party’ would consistently vote to pay out ‘billions and billions’ on euro rescue packages which are  ‘not very popular’, and, he should have added, would cost the German taxpayer hundreds of billions even in the unlikely event that they ‘succeed’.  Germany’s europhile political establishment have not only ‘have quit reason’, they may have rejoiced too early.

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Ten bad reasons why Germany will not let go of the euro

Dr Gunnar Beck

‘If the euro fails, Europe fails.’ German Chancellor Merkel’s words remind one of her precedessor’s Helmut Kohl’s dictum that ‘European integration is the other side of the coin of German reunification.’  And just as reminiscent one set of words is of the other, so both are equally devoid of logic. Yet, they signify a deep-seated and abiding commitment to EU integration and the defence of the single currency which is not readily understood outside Germany. Mrs Merkel will defend the euro to the hilt, to her own peril, that of her country, and that of the euro itself. And the same holds for any mainstream German politician who might replace or succeed her.  The reasons for this are many, but in one way or another they all relate to Germany’s historical guilt complex, and the triumph of short-term calculus over long-term evaluation which is symptomatic of our Western democracies.

First, Chancellor Merkel, like Helmut Kohl and indeed almost any mainstream German postwar politician outside Bavaria, is a convinced pro-European and pro-integrationist. For better or worse, that means she is committed to the euro. It also means that she will defend for its own sake, not because it may be in Germany’s narrow economic self-interest, debatable as even that no doubt is.

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The strange sado-masochism of Anglo-German Relations, and what it can teach us about the euro crisis

Dr Gunnar Beck

Although born in Düsseldorf, one of Germany’s larger cities, I went to university and subsequently worked and lived in Britain for many years. I now divide my time between Germany and London and am accustomed to and enamoured by many things British. There remain others, which I still struggle to understand. One is the common law which still strikes as most ‘uncommon’ law but which fascinates the sociologist within me as an ingeniously subtle and effective method of social control. Another was brought home to me during a recent telephone conversation with a Canadian friend, who was on his way to Edinburgh for his grandmother’s 105th birthday. To my enquiry as to her health he responded that she was doing fine but that her general alertness had been rather clouded of late by a sudden relapse into Germanophobia. “You know, Andrew”, she apparently confessed during one of their extended telephone conversations, “I am terribly worried about those Germans and what they may do to our boys.” The grandmother, of course, spent all her life in rural England and Scotland, never visited a theatre of war, married a man too young to serve in World War I and too well qualified to serve on the frontline during World War II, never suffered a bombing raid by the Luftwaffe, and had sons who too were spared frontline service in Germany or North Africa. She also did not lose a single close relative or friend in either war. “I’ll try to find out more about those fears,” Andrew said, “if, that is, she’ll back from the trenches.”

World War II ended nearly seventy years ago and most of the remaining war veterans will die in the next ten years. British, like German, society has undergone profound social and economic change in the last fifty years. Such change, many agree, has not been uniformly for the best. British hostility to Germany, by contrast, appears timeless and unchanging. To many it seems to offer all the comforts of an old certainty. My friend’s grandmother, despite her years, thus appears to have her fingers firmly on the nation’s pulse. When I came back from my Christmas holiday two years ago, my minimalist TV choices for the day (I only have the minimum number of channels which I cannot prevent my internet provider from offering me free of charge) included two World War II movies and an all day Nazi special on the History Channel. The all day special consisted of ten hours of “The Nazis – Lessons from History” followed by six hours devoted to ‘Auschwitz’. The next day there was a Holocaust special, followed over subsequent weeks by programmes about ‘Hitler’s women’, ‘Hitler’s animals’, ‘Hitler’s shoehorn’, and so forth. I can barely remember a week of British TV without at least one programme devoted to World War II or the Third Reich, although in November of most years World War I tends to take over for a week or two, and occasionally wartime documentaries are crowded out by more imminent broadcasts of Anglo-German clashes on the football pitch. When the Pope visited Britain two years ago or so, it was not always clear whether media and street protests were fuelled by disapproval of Catholic moral teachings or by the Pope’s nationality. Several television programmes and newspaper articles were devoted to the Pope’s ‘early years’ in the Hitler youth, a time when he was barely in his mid-teens and membership of the Nazi youth organisation was compulsory. An English friend at the Bar told me that some time ago an English trial judge, when faced with a plea of discrimination on the grounds of nationality by a German plaintiff, could not resist pointing out that one had to bear in mind that anti-German feeling and prejudice form part of Britain’s national heritage and cherished national memory. I have not come across this case, but germanophobia, the implication seems to be, is part of what it means to be British.

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The German Constitutional Court will not stop the euro bailout

Dr Gunnar Beck

On 10th July, the German Constitutional Court started hearings with a view to deciding the lawfulness of the European Stability Mechanism (Treaty) and the fiscal compact under the German Constitution. Its substantive judgment on whether the treaty package for the euroyone is indeed unconstitutional is not expected until the autumn.

Constitutional complaints against further EU integration have almost become a routine: Whenever there is a new EU treaty, it will be challenged in the German Constitutional Court. In fact, the Court has been ruling on the compatibility of EU law with Germany’s Basic Law – the official name of Germany’s constitution – since the early 1970s. For the next three decades the Court explored this question from the perspective of the fundamental rights guarantees under the constitution and whether the EU treaty order gave adequate protection to those guarantees. In a series of judgments starting with the socalled Solange decisions its judgements on the Maastricht and Lisbon Treaties the Court repeatedly affirmed the supremacy of Germany’s constitutional rights over EU law, at least within Germany.  At the same time it did not consider that any of the EU measure complained of in any of the cases before it, involved a breach of fundamental constitutional rights.

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The suspension of the rule of law in the euro zone and why Chancellor Merkel should not place her trust in rules. Part 2.

In the second of two posts, Dr Gunnar Beck examines the apparent suspension of the rule of law in the EU as countries seek to remedy the eurozone crisis.

In matters of fundamental state and party political interests, government disrespect for legal and constitutional niceties are commonplace and, it cannot be said too often, is in no way confined to the EU. There are many historical examples of states which have wonderful laws and a woeful record of compliance with them – the Soviet Union, Southern Italy, Greece, or many Latin American countries provide obvious examples. Even in the United States a highly developed legal system co-exists quite happily with some features of a banana republic, such as open electoral fraud in presidential elections, blatant corruption, grossly unequal access to justice, and (extra-territorial) human rights abuses. And Britain has long operated an image of public probity and rectitude which ingeniously disguises often unaccountable and invisible state and secret service action and an ancien régime based on a system of taxation where practically anyone who earns more than £100,000 including senior civil servants escape the official tax rates applied to the less well-paid, and where investment bankers and almost anyone with serious money can avoid paying income tax altogether as soon as they bother to engage a tax accountant. In situations where double standards and ‘official’ violations of the law are disguised by complication, lack of transparency and glossed over by xenophobia and delusions of political self-righteousness, they will not necessarily, and certainly not quickly, erode public confidence political stability and even a general tendency to rule-following and respect for the law.  The problem with ongoing breaches of the rules governing the euro zone is that the rules are straightforward, the breaches obvious and credible official denial and effective obfuscation practically impossible.

Much more worrying in terms of the crisis at hand, however, than the gradual erosion of  public trust and confidence in the EU project by government and EU institutional disregard for the Union’s own rules, is precisely the persistence, at least for the crucial time being, of too much trust and misplaced confidence in promise-keeping and rule-following amongst German politicians. Chancellor Merkel has insisted time and again that further German help must be conditional on the tightening of existing rules combined with additional safeguards and promises of more stringent budgetary controls by the weaker euro zone countries. To ensure that in future the economic policies of the other euro zone countries are sufficiently in line with the refined Maastricht criteria, the fiscal compact – a separate treaty negotiated between 25 of the 27 EU Member between December and January 2012 – introduces several exacting criteria to ensure budgetary discipline which go considerably beyond existing requirements:

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The suspension of the rule of law in the euro zone and why Chancellor Merkel should not place her trust in rules. Part 1

In the first of two posts, Dr Gunnar Beck examines the apparent suspension of the rule of law in the EU as countries seek to remedy the eurozone crisis.

Germany’s former Chancellor Kohl may have prided himself on his ignorance of economics, but the Bundesbank and many German academics and other experts in the 1990s expressly warned against the inherent dangers of establishing a currency union whose members had pooled sovereignty in some policy areas but which retained fiscal autonomy together with many other political characteristics of the nation-state. Below high level political insouciance the German position during the negotiations of the Maastricht Treaty was characterised by three great concerns

  • That the European Central Bank (ECB) would not be committed to price stability in the same manner as the Bundesbank,
  • That excessive deficits and lax budgetary policies by some Member States may threaten the stability of the single currency, and
  • That German taxpayers may end up assuming liability for the debts and deficits of other Member States.

The Maastricht Treaty and its successor treaties provided safeguards which, at least formally, addressed all three concerns:

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