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Über Alles After All

Europe’s German future.

Feb 13, 2012, Vol. 17, No. 21 • By CHRISTOPHER CALDWELL
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Germans grow up getting the lesson drummed into their heads that they, as the perpetrators of the twentieth century’s worst atrocity, owe a large and perhaps unpayable debt to humanity. Some Germans draw the conclusion that the European Union is entitled to collect this debt on humanity’s behalf—that it is entitled to obedience, even deference, from Germany. Finance minister Wolfgang Schäuble, 69, has at least some sympathy with this view. So do some other senior members of Merkel’s party and cabinet. The EU’s own bureaucrats, of course, believe to a man that Germany’s responsibility for making Europe whole is limitless. 

It is difficult to say how many people in politics sincerely accept this view, because enormous pressure is brought to bear on people who dissent from it. Jürgen Trittin, the senior politician in the Green party, calls those who would do anything to slow down European integration regressive nationalists. When Wolfgang Bosbach, one of the most loyal members of Merkel’s party, decided that the liabilities to Germany in vouching for Greece were growing dangerously high, party regulars gave him the cold shoulder. This September, Merkel’s aide Ronald Pofalla strode across the floor of the Bundestag during a vote about contributing more German money to another European rescue package and told Bosbach: “I’m sick of looking at your face and listening to your sh—.” What upset Merkel’s people about Bosbach was precisely that he had long been one of the party’s most loyal soldiers. Fifty-nine-year-old Bosbach recalled a few weeks later: “There have always been naysayers, always. But I was never one of them. That was really the first time I said no, and a few people were absolutely shocked.” Other German politicians worry that Germany’s neighbors are taking Germany for a ride, but their worries are practically inaudible. 

In the barrooms and TV talk shows of Germany, however, impatience with Europe and the euro is at a boiling point. The opinion pollster Renate Köcher of the Allensbach Institute found recently that in the course of 2011, the percentage of Germans uneasy about the eurozone rose from 38 percent to 55 percent. Whereas at the turn of last year voters opposed kicking any country out of the eurozone by a margin of 40 percent to 36 percent, by September they favored kicking out the biggest debtors by 46 percent to 29 percent. 

The almost universal reaction of European leaders has been that the German people don’t know what they’re talking about, and many German politicians have paid lip service to the same idea. For Bosbach, this is a danger to democracy. “It may well be that people don’t understand every last detail about the Greek budget and the situation on the financial markets,” he says. “But they have a keen grasp of how successful the rescue measures are likely to be. And up till now, at any rate, the skeptics have been vindicated.”

I spoke about this democratic disconnect with Michael Fuchs, the deputy chair of Merkel’s party in the Bundes-tag, who is responsible for economics and the euro. He was sitting in his office near the Brandenburg Gate, preparing for a trip back to his constituency the following day, and he admitted his voters were getting restive. “We are growing far apart from our people,” he says. “I tell you, the questions I get are not really .  .  . convenient. Somebody will say to me, ‘Michael you’re a nice guy, but can you explain to me why I have to work until 67 and I get [as a pension] 46 percent of my final salary, while a Greek guy is retiring at 57 with 94 percent of his last salary?’ ” In the past two years, German journalists have coined the word Wutbürger—a rough translation might be “rageniks”—to describe such people. 

Jörg Krämer believes the tensions between voters and politicians may now be affecting the financial rescue efforts themselves, because markets believe popular discontent constrains governments and undermines their credibility. “Sooner or later, politicians will pick up this ‘anti’ sentiment,” says Krämer. “A new government may step away from the guarantees the last one gave. This, in the end, explains why the bailout policy doesn’t work. Because on paper it looks perfect.” In fact, France’s Socialist presidential candidate, François Hollande, favored to beat Nicolas Sarkozy in April’s elections, has threatened not to honor the arrangements Sarkozy reached in France’s name at a November Euro-summit and last week’s meeting in Brussels.

Like Sarkozy, Merkel has been dealt a difficult hand. She would not be paranoid to worry that, sooner or later, some eloquent member of her party will topple her by rallying the nation’s natural majority against the bailouts. Germany’s Supreme Court ruled last fall that all further efforts to aid struggling eurozone countries must be approved by a vote in the Bundestag, not by ministerial sleight-of-hand. So her binding undertakings on solving Europe’s debt crisis must be public ones, not backroom deals. To complicate matters further, her Christian Democrats rule as part of a coalition with the Free Democrats (FDP), traditionally Germany’s pro-market party, and the FDP is a zombie party. 

The FDP’s problem is that its leadership insists tax cuts are the answer to every policy question. German voters apparently believe that tax cuts are the wrong answer, at least when the questions involve debt. The FDP’s national popularity has lately fallen to 2 percent—below the threshold at which parties can enter the Bundestag. And the country, more generally, is moving left. A year ago, antigrowth protesters in Stuttgart, furious at plans to demolish the city’s beloved train station to make way for a $6 billion commercial complex called Stuttgart 21, gathered by the thousands for weekly demonstrations. Last spring those protesters played a role in booting Christian Democrats from the governorship of Baden-Württemberg, which they had held since 1953.

Merkel is more an operator than an ideologue. She is a perspicacious observer of both allies and adversaries. As evidence, people who know her say that she is uproariously, if sometimes cruelly, funny, and does devastating imitations of Sarkozy and King Abdullah of Jordan. Although raised in East Germany, she did not travel in dissident circles before the end of communism. Indeed, a curious report in the newsmagazine Der Spiegel on the twentieth anniversary of the fall of the Berlin Wall revealed that she had spent that fateful day at the sauna. She has got to where she is not by sharing her party’s instincts and opinions but by sizing up its leaders and outmaneuvering them. An entire generation of conservative leaders who vied with her for leadership of the party—including Stoiber, former CDU chairman Friedrich Merz, former governor of Hesse Roland Koch, and the present (figurehead) federal president, Christian Wulff—have found new employment. Her only remaining potential challenger within the party is Ursula von der Leyen, the Brussels-born labor minister and leonine mother of seven, who is the daughter of the former governor of Lower Saxony. 

Merkel has responded to shifting public opinion by shifting her party to where the votes are. At the Christian Democrats’ annual convention in Leipzig this November, there was much grousing among the party rank and file about the “Social Democrat-ization” of the CDU, especially as Merkel tried to rally her mostly free-market loyalists behind a minimum wage. (She succeeded.) Last March, during the two weeks that separated the Japanese tsunami from that Baden-Württemberg governor’s election mentioned above, where environmental issues loomed so large, she reversed years of party policy and committed Germany to the dismantling of its nuclear power plants. She has taken up the Social Democratic positions on limiting compulsory military service and reforming secondary schools. “Tell me one difference between Social Democrats and Christian Democrats right now,” says SPD economics spokesman Carsten Schneider. “I can’t name one.” 

While Merkel, by temperament, could change her position on the euro, that is easier said than done. Journalists who have spoken to her privately say she expresses frustration that if she invites 10 economists to a meeting, she gets 100 opinions. She sees the difficulty of rescuing Greece and has dropped broad hints that Greece might need to leave the euro. According to a senior CDU politician it was she—not Sarkozy or European leaders more generally—who laid down the law to Greek leader George Papandreou when he announced a referendum on an EU bailout package last fall. 

By contrast, a German exit from the euro is a course that Merkel is unwilling even to discuss, and she has been categorical in her commitment to the single currency. “If the euro fails,” she said recently, “Europe fails.” Her attempts to balance the needs of Europe and those of Germany have often left her with the worst of both worlds. That is, while many in her party consider her a spineless and indecisive Europhile goody-goody, those in neighboring countries see her as a predictably Teutonic stickler for Ordnung. You can see her depicted in Greek and Italian editorial cartoons wearing a Bismarckian Pickelhaube or a Stahlhelm of the sort favored by the Wehrmacht early in the last century. 

Words and Bonds

The simplest method of rescuing the euro is for the debtor countries to leave the eurozone and adopt new currencies. Unfortunately, that appears to Europe’s best economists highly dangerous. Once you rule that out, there is no point in mincing words: The choice is between (a) allowing the currency to break up and (b) rescuing it by having prudent countries pay the debts of profligate ones. 

Option (b) means consolidating fiscal authority in Brussels, and allowing that central authority to issue debt in the names of the formerly sovereign member states. Effectively, it means disbanding the countries that make up the EU. Economists speak of “fiscal union” among European countries. There is, however, little agreement on what these words mean. “In Germany,” says Thomas Mayer from his office atop the Deutsche Bank tower, “fiscal union basically means you send fiscal policemen into southern European countries to force them to have austerity budgets. When the southerners talk about fiscal union, they expect large-scale transfers from north to south. With such a different debate, we never will get fiscal union.”

Most economists think real fiscal union will eventually require some kind of “eurobond”—a common pot of credit on which all countries can draw. Eurobonds represent everything that the historical experience of Germans warns them against. The more irresponsible the country, the more irresistible the appeal of eurobonds. That is why German politicians, with few exceptions, deplore them. Barely has the word “eurobond” formed in my mouth when Michael Fuchs replies, “Nonsense. We need pressure on those countries to do something. If you don’t use pressure, they will start partying again.” (This moralistic language—describing indebted countries as “partying”—is common in German discussions of money. Countries deep in the red are called Schuldensünder—“debt-sinners.”)

Germany’s bankers are even more skeptical about eurobonds than its politicians. Axel Weber—formerly head of the Bundesbank, formerly a prominent German member of the European Central Bank, and formerly viewed as the likely next head of the ECB—resigned from his posts when a plan for the bank to buy troubled countries’ debt on the secondary market passed despite his opposition. When the ECB started buying Italian bonds last summer, its second-most prominent German, chief economist Jürgen Stark, resigned, too, rather than participate.

Even in the finance ministry—where Wolfgang Schäuble, the 69-year-old arch-Europeanist, serves as minister—there is skepticism. “People the minister’s age and older are very conscious Germany was given a second chance,” says one ministry aide. “They see the EU as the vehicle for Germany’s redemption, and they are willing to make concessions to protect the euro. But they can’t make concessions that don’t work.”

Still, there has been a subtle change in the way the ruling coalition’s politicians address the issue of eurobonds. Last year they said: No eurobonds. This year they say: No eurobonds until Europe has the proper rules in place. In fact, the way Germans use the word “eurobond” in arguments over the euro crisis has a lot in common with the way Americans use the word “quota” in arguments over affirmative action. Some people genuinely hate the thing. Other people merely hate the word, because they think it costs them votes. Sigmar Gabriel, head of the Social Democrats, made this point last fall when he argued that the Christian Democrats, despite their professed abhorrence of shared liability, had laid the groundwork for a eurobond by agreeing to buy rickety European debt. I asked one politician in Berlin in November if he thought eurobonds were an inevitable part of the solution to the euro crisis. “On the record I say no,” he said with a smile. “Off the record I say yes.” 

‘They are all going to hate us’

Under pressure of the euro crisis, Germans have taken on the traits, ostentatiously and publicly, of an older Germany, with which recent generations of Europeans are unfamiliar—an aphoristic, proudly provincial Germany that tends to present everything as common sense or home truth. “You cannot fight debt with debt!” says a provincial finance minister. “Sovereignty ends where solvency ends!” says a national newspaper editor. “You don’t ask the frogs”—the Greeks are the frogs in this one—“if you can dry out their pond.” 

Certain Germans are, for the first time in decades, willing to say they know better and to needle those who don’t. The rental car magnate Erich Sixt ran an ad in Greece over the summer: “Dear Greeks! Sixt is accepting drachma again!” The Germans’ newfound confidence is visible to anyone who comes from an English-speaking country drowning in debt. Volker Kauder, the leader of Merkel’s Christian Democrats in the Bundestag, warned Britain on the eve of a November summit that it ought to fall into line behind Franco-German plans because “Europe is speaking German now.” This attitude worries some people. They see it as a step towards nationalism. “Go into a German football stadium sometime,” said a friend of mine who was raised in the West Germany of the 1980s, when patriotism was still taboo. “Suddenly everybody knows the national anthem.”

That is a misplaced worry. But the traditional German deference to American judgment, which received a severe blow during the Iraq war, has been further damaged by the debt crisis. On a train from Munich to Leipzig I ran into an executive who managed to convey a bottomless contempt for both America’s tort lawyers and its designers of derivatives. “In your country,” he said, “where you have to a put a sticker on your microwave saying ‘Don’t put your pet in here!’ how could you make these financial weapons of mass destruction?” Other Germans express impatience with Timothy Geithner’s frequent visits to lecture Germans, and America’s stewardship of its own debts is universally ill viewed. Economist Hans-Werner Sinn believes certain Americans support eurobonds as a way of having someone else pay for the losses of American investment funds. “I think everyone here understands that game.” 

The bleakest view of American irresponsibility comes from the largely pro-American Edmund Stoiber, who believes the country’s $15 trillion in debt will have “unforeseeable consequences” for the world. “This is something I could not have imagined five years ago. Democracy is for me a sacred thing, and today the democracies are losing their prestige. They are associated with debts and crises.” He notes scathing remarks made by Chinese deputy foreign minister Fu Ying about the tendency of Western democracies to rely on debt and adds, “That is a terrible insult that unfortunately has a grain of truth in it.”

Last year, the labor economist, central banker, and Social Democratic politician Thilo Sarrazin wrote the most controversial German nonfiction book since the Second World War. Deutschland schafft sich ab (“The Abolition of Germany”) addressed the mismanagement of the country’s welfare state and the demographic decline that would make its programs hard to fund in the future. It added a few home truths about declining scholarship and productivity in Germany’s increasingly immigrant workforce. Sarrazin made his points with a freewheeling bluntness that certain Germans deemed unseemly in a countryman. Angela Merkel was one of those certain Germans. She forced his resignation from the Bundesbank. 

In his pleasant house on the outskirts of Berlin, surrounded by larches and pines, Sarrazin is writing a book on the euro. While still in the early stages, he says a lot of the discussion about the currency’s merits reminds him of a speech by Brezhnev to the Communist Central Committee or the pope’s Easter message. “You understand?” he says. “You can do nothing else but applaud, but it doesn’t get you any further.” Sarrazin has a reputation for stating plainly what many Germans think but don’t dare say, and so it is with the euro. When one gets past political piety, Sarrazin believes, one is brought face to face with the simple cause that has doomed most currency unions: different national habits. Modern Italy, he notes, has existed for 150 years. “They still have not come to grips with the economic problems of the south,” he says. Europe is unlikely to do better with habits that vary even more widely.

The idea that such differences could be transcended arose in the immediate aftermath of the Second World War. “Germany was not only militarily but morally defeated,” Sarrazin reflects. “One discovered the Europe of Charlemagne, of Franco-German friendship. Many Germans wanted to give their nationality up in favor of being part of Europe. But in a Europe where all the neighbors choose to stay Dutch and French and Czech and Polish, you have no choice but to stay German. Even if some Germans don’t like it.”

Others see Germany’s role in Europe changing, too. “The assumption that we finance Europe, that’s over,” says Klaus-Dieter Frankenberger. “That because of history, the war, we have to spend ourselves out of historical guilt. That’s over. Unification made a difference.” 

Germany may not be changing as quickly as Frankenberger thinks. Germany still has an unusual—that is, an unusually diffident—relationship to Europe. There is still a limit to how far Germans will permit themselves to go in expressing discontent. “They run amok over Stuttgart,” says the independent economic adviser Bernhard Eschweiler, who worked for 17 years at J.P. Morgan. “But not over the euro. The public in the end will not give the green light to pull out of the euro.”

Germany, unlike other Western countries, has no party built on hostility to the European Union and no hot-blooded anti-euro populist. The closest approximation thereof is Peter Gauweiler, a sharp-witted Bavarian lawyer who belongs, like Edmund Stoiber, to the Christian Social Union (the Bavarian sister party of Merkel’s Christian Democrats). He was a protégé of the CSU’s charismatic orator and leader Franz-Josef Strauss in the 1970s. This fall, he narrowly lost a bid to become the CSU’s deputy leader and to set the party on an overtly anti-euro course. The battle pitted the party establishment against Gauweiler and most of its rank and file. Gauweiler has launched a number of lawsuits over the years, including most recently the one that resulted in the decision requiring a parliamentary vote for any new bailout funds. 

Gauweiler is a welcoming, voluble man with a big, white moustache. He often wears Bavarian Tracht. He is also well read. It is tough for an American journalist to get him off the subject of American literature (Twain, Hemingway, Fitzgerald, Gertrude Stein), for which he has considerable fondness. He, too, likes moralistic aphorisms. (“Going into debt is like taking drugs,” he says.) And yet, when you ask Gauweiler, the most ardently anti-euro politician in Germany, whether Germany should pull out of the single currency, he is brought up short. “Well, that’s very hard,” he says. Almost at a loss for an aphorism, he explains that the decision to adopt the euro is probably not something that Germany can undo. “You can make a fish soup out of an aquarium,” he continues, “but that doesn’t mean you can make an aquarium out of fish soup.”

Europe is about diversity more than unity, Gauweiler thinks. In their assumption that Europe can be made into a single market, a single culture, it is the EU’s builders and not their opponents who have set themselves against European values. Gauweiler recommends a speech that Thomas Mann gave shortly after World War II in which he explained that what Germans wanted in the future—or ought to want—was a European Germany, not a German Europe. “This whole business with stability and so on is about making a German Europe,” Gauweiler says. “You understand? We give them money and vouch for their credit, and we tell them: ‘Do this and do that.’ They are all going to hate us.”

Christopher Caldwell is a senior editor at The Weekly Standard and the author of Reflections on the Revolution in Europe: Immigration, Islam and the West

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