The crisis in Greece last month and the subsequent bailout deal have laid bare the dominance of Germany over the EU and Eurozone nations. When crunch talks came it was German Chancellor Angela Merkel who dictated proceedings, refusing to authorise Greek debt relief in order to protect German banks which possess the majority of the debt.
At the same time Merkel’s Finance Minister, Wolfgang Schäuble, warned Greece is unable to compete in the Eurozone and should be forced out of the EU. Such threats succeeded in their intentions and broke the nerve of Greek Prime Minister Alexis Tsipras, who had presumed the EU’s leadership would not contemplate ejecting Greece for fear of undermining the ‘European ideal’.
Under German leadership, the EU has become an aggressive beast, no longer willing to try and secure agreements through concessions and negotiations, but rather through diplomatic and economic force. To fully understand why the EU has developed into a huge domineering Superstate, it is necessary to examine how its leadership has now shifted from France to Germany.
The EU’s predecessor – the European Economic Community (EEC) – was first dominated by France, enabling major benefits for French agriculture and industry. It was French dominance which ensured the Common Agricultural Policy (CAP) protected French farmers, and high trade tariffs were designed to protect French domestic industry. It was telling that when former British Prime Minister Harold Macmillan was attempting to secure British membership of the EEC in the 1960s, it was French President Charles De Gaulle who opposed Britain. He ensured the negotiations came to nothing – despite the majority of the other States within the EEC supporting Britain’s inclusion.
Ever since its unification in 1871 Germany has possessed the economic power to dominate Europe. Its swift increase in economic and military power was one of the contributing factors in the heightening tensions at the start of the 20th century. While the two World Wars caused huge economic, political and social damage to Germany, its overall potential remained. Despite being split into East and West Germany (divided by the Berlin Wall) in 1949, for the latter half of the 20th century the (west) German economy swiftly recovered from the carnage of the Second World War, aided in part by German debts being written off by other western nations.
The Greek crisis revealed the views of several senior German politicians. The EU is no longer an ideological project to ensure harmony in Europe, but is now a vehicle which Germany is utilising to further its own national interests. Merkel and Schäuble conveniently ignored Germany’s own history of debt defaults and the necessity of debt cancellation in its own history, something Greece had voted in favour of – not to mention the consequences of forcing harsh terms on an already weakened and humiliated nation.
Since reunification and the expansion of the EU, Germany has further increased its economic power. Its manufacturers and exporters have benefitting hugely from the major devaluation of the Deutschemark, which occurred when it merged into the euro, as well as from cheap migrant labour from poorer EU nations. German banks and investors also benefited from the opportunities available in other Member States. Meanwhile, the French economy has effectively stagnated over the last couple of decades, while Germany has increased its economic dominance, resulting in Chancellor Merkel now being recognised as the most influential Head of State in Europe.
German industry also significantly benefitted from Greece’s profligate spending, and German banks profited by providing loans to Greek companies and institutions, which they must have clearly understood would have been impossible to repay. Indeed Germany has managed to profit from the crisis in Greece by around £70 billion, thanks to lower interest payments on funds it borrowed – governments can sell bonds to international investors as a way to borrow money – revealed in a study published by the Leibniz Institute of Economic Research. The report said Germany has ‘disproportionately benefited’ from this investor ‘flight to safety’, adding: ‘Bad news in Greece was good news in Germany.’ The £70 billion Germany has saved since 2010, which accounted for more than 3% of GDP, outstrips the £64 billion they paid as their share of the international rescue package for Greece. In effect, this means Germany will have made a profit even if Greece does not pay back a single Euro!
Berlin’s wish to force harsh terms on the Greek government was in stark contrast to the more conciliatory approach advocated by French President François Hollande. In addition, the German rejection of debt relief for Greece – to protect German banks – goes against the advice of the International Monetary Fund, no stranger to the Greek debt issue. Other Eurozone members such as Finland recognise the significant concessions made Tsipras and his negotiators already, and are beginning to break away – not willing to share Berlin’s desire to squeeze Athens further.
It is clear Merkel is far more concerned about German interests than for the long term economic stability of the Greek economy. The outright humiliation of the Left-wing Syriza party and the Greek government, by wrenching political powers from a country greatly in need of help, has been a major coup for the German Chancellor. Other anti-austerity Left-wing governments across Southern Europe may now be wary of facing a similar fate. Assuming power over a sovereign national state is now seen within the Eurozone leadership as a way of preventing a similar financial crisis developing in the future. It is questionable if this will work in either the short or long term, especially if a larger and more prominent Eurozone economy, most likely Italy, faces further financial difficulties.
Germany has learnt from its past mistakes and has concluded Modern Europe cannot be dominated by force of arms. It now seeks through economic dominance and by using the increasing political powers of the EU’s institutions, whilst hiding behind the façade of Brussels. Berlin’s increasing prominence in the EU is even more reason why we must Get Britain Out.