Germany’s inner struggle stifles EU action

Germany, knowing that its future lay with its proven economic prowess wanted to ensure captive markets. France, overtaken twice by a belligerent Germany in the previous century, sought permanent peace. Knowing that voter aversion ran deep, French and German leaders determined to build and expand the EU by stealth if necessary.

Indeed, Frenchman Jean Monnet, one of the architects of the EU reportedly said “Europe’s nations should be guided towards the super state without their people understanding what is happening. This can be accomplished by successive steps, each disguised as having an economic purpose, but which will inevitably and irreversibly lead to political union.”

Initially, the loss of sovereignty was acceptable to the southern democracies struggling with uncertain economies, Portugal, Italy, Greece and Spain (later to become known as the PIGS), which benefited from massive EU funding. In the main contributing nations, notably Germany and Great Britain, voters showed greater hesitancy. In France, Denmark and Ireland, which initially voted against political union in referenda, means were found to ignore voters’ wishes. To overcome northern objections, the union was touted as a free trade area that would benefit productive economies.

Over decades, periods of economic stress always provided proponents of greater centralization with a means to advance their agenda. Greater union was the cure all for economic ills. The establishment of the common currency in the late 1990’s was seen as the lynchpin in making the Union permanent.

But the euro itself was fatally flawed from the start. Despite the lack of fiscal unity needed to underpin a single currency, European leaders took the plunge and trusted that all would work out in the end. Their gamble is now proving costly.

Today, with pro-union hierarchies in firm control of the political class in France and Germany, and with career politicians susceptible to party coercion, national parliaments are becoming less and less representative of popular will. In any event these national bodies have already ceded some sovereignty to the EU, with some 70 percent of legislation estimated to come from non-elected officials in Brussels. But the European Parliament itself is virtually powerless in setting policy. The net result is unaccountable government. The Federal Constitutional Court of Germany cited this “democratic deficiency” two years ago.

The hardships of the current recession and debt crisis have fanned voter apprehension. There can be no doubt that street level discomfort with the super state is growing in Berlin, London, Paris, and Rotterdam.  Conscious of these issues, northern tier Euro zone politicians are now loathe to antagonize voters already frustrated with the political status quo.

However, Germany’s political elite may be seeing the crisis as a singular opportunity to gain greater control of the countries that are on the receiving end of its bailout funds. Currently, Germany’s formal executive power throughout the EU is far lower than its bailout contributions would suggest. Berlin is actively looking to change this. If they are successful we may look back on the establishment of the euro as the means by which Germany finally acquired the empire sought by Bismarck. German voters, not sharing these dreams, may be less willing to pay the price with their hard earned savings. As a result, German leadership is currently rudderless. Bereft of direction from its most important member, the EU itself drifts.

But let there be no uncertainty on one point: Either Germany gains control of the crisis and creates a German led super state, or the experiment with European integration very well may have run its course.

By John Brown

John Browne is a former member of the UK Parliament and a current senior market strategist for Euro Pacific Capital.