Merkel, and the end of an 'ever closer' EU

Most followers of the euro crisis agree that the German elections, to be held on September 22, will be a watershed moment. Everything that had been put on hold in the crisis will finally be allowed to happen once Angela Merkel has been returned to power.

This is one way of looking at it. It is certainly plausible that all the painful and ultimately inevitable decisions on the future of the eurozone – everything that will cost German taxpayers money — will have to wait until election day.

As I have argued for a long time, it is obvious Europe has been trying to delay any decisive action until after the German elections. With little more than a week to go, it seems that this strategy has worked.

But a question remains. Apart from the economically inevitable, is there anything else that has to wait until election day? In other words, what political developments in Europe can we expect in the coming years?

The answer to this question is less clear. Though the actions of the past years have meant a constant assault on national sovereignty and a transfer of power from the member states to the European Union and its agencies, these shifts were mainly driven by economic necessity. There was no great political enthusiasm across Europe for new institutions like the European Stability Mechanism nor the European Central Bank’s activities, let alone the European Commission’s greater role.

A few weeks ago, Merkel gave an interview to German national radio in which she said: “We discuss if we need even more competencies for Europe. However, we can also consider whether we can give something back.”

It was a typical Merkel statement: vague, but hinting at what she is really thinking. It may well signify a change of direction for the European Union.

From the beginning of European integration, the process of European politics has been a one-way street. Power was gradually shifted towards the European level, never the other way around. An “ever-closer union” was the motto.

Today, the future of European integration looks less certain, not just because of Merkel’s cryptic remarks. The years of crisis have led to a growing disillusionment with the European project. They have also estranged former allies from each other.

Though it would be premature to proclaim a return to the nation state in Europe, it is likely that we will witness a hollowing out of the European Union in coming years. The interests of member states are far too diverse to be reconciled. The only chance European politicians have to save the European Union is to cut back its reach.

Earlier this year, British Prime Minister David Cameron promised a referendum on Britain’s continued membership in a reformed European Union. Cameron said he wanted to remain in Europe but only if the European Union changed – which to him, meant if London could repatriate some powers from Brussels.

Cameron’s problem is that in order to change the European treaties, he needs allies. Britain cannot single-handedly change the rules of the EU game. If it isn't happy with the current state of affairs but the other members were, the only option for Britain would be to pull out completely.

However, it appears that Britain’s dissatisfaction is at least partly shared on the continent. France’s President François Hollande has repeatedly criticised the European Union and the European Commission for interfering with what he regards as internal affairs.

Now that Merkel has also signalled that she is willing to discuss the balance of power between the national and the European levels of government, the door is opened for a serious debate. In the past, Britain, Germany and France have seldom pulled in the same direction on Europe. Their economic policies were often incompatible; their foreign policy outlooks too diverse.

If these three heavyweights are seriously considered curbing EU powers, it would signify a break from previous policies. And it makes a lot of sense.

Within the European Union, Britain is Germany’s most likely ally in economic questions and vice versa. They both share a similar approach to economic policy that is much more liberal than, say, France’s or Italy’s. Merkel cannot wish Britain to depart from the European Union and leave the Germans alone with the rest.

Britain may have made a lot of noise about its frustrations, but it is not in Britain’s interest to pull out completely and leave burnt bridges behind. Despite being outside the eurozone, London is Europe’s most important financial centre. If Britain left the EU, London’s position would be threatened by other places, most notably Paris and Frankfurt. The fear in the City of London is that once Britain had pulled out, the EU would retaliate with an attack on the British financial services sector.

So Germany has an interest in keeping Britain in Europe, and Britain certainly needs to remain part of the European common market. The best way to achieve this is to change the nature of the European Union in a way that would allow Britain to continue its membership. But this would necessitate a weaker European Union.

Convincing other European countries of the need to curtail the EU’s powers may not be hard. Crisis countries, in particular, resent receiving austerity diktats from Brussels. The EU and its Commission have lost popularity – which is precisely why Hollande is also campaigning against Brussels.

It would be a major change of direction for Germany and France to reverse the decades-long process of integration. For Merkel, it would mean a break with her country’s and her own party’s long-held positions. But it makes good sense for her do so.

It is not just the euro crisis that had been put on hold by the political considerations linked to the German elections, but the whole question of the future of the EU.

Following September 22, the cards will be reshuffled in Europe – irrespective of the outcome of Germany’s election.

Dr Oliver Marc Hartwich is the executive director of The New Zealand Initiative.

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Indeed we are all waiting to see what happens when the German elections are over, Greece as usual is trying to pre empt what Merkel will do and Sameras is in Brussels next week to discuss more aid without any new austerity being imposed and a debt haircut. German banks are saying no more aid without new austerity measure being imposed and Merkel has sai said she wont allow a debt haircut . And it is clear that Greece is going to come up very quickly on Merkels radar.

Europe is the prime example of "the great deregulation". That is, globalisation gone mad, breakdown of controls and allowing the real money to let rip as it sees fit.

While the EU looks like a dogs breakfast of red tape, this is only for the plebs. The real money
goes where it needs to: banks or governments, mergers, acquisitions, whatever is needed.

The loss of the nation state as a barrier that protects populations began with the multinationals and FTAs but economic unions are the pinnacle of mechanisms to benefit
capital at the expense of citizens.


Very interesting article. But in spite of the 'cryptic' quote here, Merkel has constantly talked about the need for more fiscal union, repeating a number of times that the solution to current problems is more union not less. Less regulation can mean many things of course, especially in a continent suffocating in bureaucracy, but if there are economic changes they will have a profound effect. If she reverses her attitude to more fiscal union a lot could unravel. What happens to the debt, what happens to the currency? Perhaps she is preparing for a dual currency setup? She is pretty cagey. She probably isn't sure what she'll do and the comment is cryptic enough for her to reinterpret it

The sovereign debt crisis in Europe will soon resume. Greece will probably be the centre of attention yet again, with another round of default and requiring more billions of Euro dollars, as a further bail-out to pay the public servants (police, doctors, teachers, nurses, etc). Doubt anyone even thinks the Greeks will ever repay the debts.

I'm not saying that there will NOT be a dual currency set up, but I am prepared to say that it is not possible for it to work because it will force countries into boxes they may not have chosen for themselves and from that day forward a country placed into the lower caste euro will never ever be able to rise to the upper caste euro economic box and that is not only daft but plain wrong and frankly demeaning.
Essentially as I say it would cause class wars down the track if not immediately, (Or should I have written caste wars where you have the haves' and the have nots)?

Who can say what Merkel really thinks or what that cryptic comment really means either.
Is Merkel really that powerful that the EU and the Eurozone in particular should hang on what happens in her little world?

Either way on this entire subject, it is really good to be able to regularly read common sense and knowledgeable reports and discussion pieces from someone who really does have his ears to the ground. Thank you Dr. Hartwitch.