Germany Should Grow A Pair

The worst economic crisis since 1929 is not a time for a step-by-step policy Merkel-style, but for radical change that will save the European Union from marginalisation within global politics.

In 1862, Bismarck famously proclaimed that German territories should be unified with blood and iron. Unification was supposed to secure German territories from a geopolitical threat posed by powerful France, Britain and Russia.  Nine years later, a German alliance won a war with France. Bismarck used the victory to force smaller duchies and kingdoms of the Reich to yield their power to the Prussian throne. Unified Germany became a global superpower and plays this role until today. Now, it is time for Germany to do the same with the rest of EU and secure Europe’s status in an increasingly multilateral world.

But Germany of the 19^th century is different from EU of the 21^st, yesterday’s emphasis on blood and iron has been replaced today by capital and budgets. Conventional wars are no longer commonplace, and Europe does not need an army the size of America’s to secure its interests around the globe. Today’s wars are fought within stock markets; businessmen are soldiers and central banks are the supreme commands. A country’s strength is no longer measured by the number of tanks owned, but by its macroeconomic results and the capital it operates.

How does the European Union plan to compete with the globe’s biggest players if it does not even possess a unified financial and budgetary system? Within the current Eurozone system, the currency is common, but budget policies are made independently by each members, a decision no state would ever allow in its domestic financial system.  Imagine if each of England’s counties could run their own budgets and carry their own borrowing costs, but use the same currency to calculate their debts. It simply does not work that way.  Sooner or later, poorer counties would run out of cash and would have to introduce their own currencies to regulate their debt. In the Eurozone, the European Central Bank wants to avoid this situation by showering the indebted countries with virtual money, which prolongs their agony, rather than cures their disease. In addition, private investors go for an easy buck, taking advantage of ECB’s bailouts by demanding irrationally high interest on loans for peripheral Eurozone states.

The Eurozone, and in the long-term all of the European Union needs fully integrated public financing. The next logical step towards a unified Europe is to introduce Eurobonds and centralised budgeting policy financed through a common federal income tax. This will reduce investors’ speculations and put an end to irrational welfare spending by reckless politicians. It will also significantly accelerate EU’s decision-making and improve balanced development across the EU. The list of profits is long and enticing.  Many would argue that public financing operated by Brussels would not be perfect and it would give yet another area where bureaucrats’ limitless imagination could thrive, but that’s a small price to pay if we still want the EU to count in the global arena.

The question is how can it be achieved. Multilateral negotiations so far have been extremely successful in establishing a European institutional framework, but one has to remember that this was before Europe suffered an identity crisis, and at a time when the economy was prosperous and future seemed bright. It will be hard to rebuild confidence for the EU within society. Southerners already fear German hegemony, while the Germans don’t want to hand out money for laziness and incompetency. The only country which can really make a difference is the good old Deutschland, which is viewed in the South to be a sort of a boogeyman, who wants to turn all those Italians and Greeks enjoying their life on the beach into blond, blue-eyed robots working 24/7. This image is plain idiotic and dangerous for all of Europe, as it demonises what is the only possible way for Europe to survive.  To make things worse, the United Kingdom bails on common budgetary discipline to safeguard its financial sector, while Hungary descends into a semi-autocratic regime. It seems that the last big European country which is still enthusiastic about the European project is Poland,  but that doesn’t really change much in a wider picture.

That’s why it is so important for Germany to finally get over its post-war trauma, grow a pair, and lead Europe to fully-fledged federal union, the United States of Europe. The worst economic crisis since 1929 is not a time for a step-by-step policy Merkel-style, but for radical change that will save the European Union from marginalisation within global politics. European countries can fool themselves into believing that they can go on profiting from the common European framework without giving up sovereignty, but sooner or later they will have to realise there is no way for the EU to maintain its position in the world without committing itself to a federal system with common budget and central executive. Europe of Nations, which some Eurosceptic circles propose, is no alternative to United Europe and it will not grant us security in the long-term and in the end, seal our doom.

Photo Credit: futureatlas.com

Tagged EU, Eurocrisis, European Union, Eurozone, Germany, Hungary, PIGS, Poland, UK