Friday

23rd Feb 2018

Opinion

The Greek crisis: What's Germany up to?

  • Schäuble and Merkel have different priorities and a different risk assessment in the euro crisis (Photo: Tobias Koch)

If there is one man standing now for the ugly German, it is Wolfgang Schäuble. Ironically, the German finance minister is also the player in the current euro drama who is most dedicated to putting the joint currency on a sustainable footing.

Tonnes of comments have been written in the last weeks about how Germany has put its narrow national interests above the European interest. By turning Grexit into a real policy option, the narrative goes, Schäuble has further damaged Greece and weakened the eurozone.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

The only problem with that story is that Schäuble doesn’t fit into the role of the villain. Schäuble is the last political survivor of the Helmut Kohl era. As a German interior minister, he managed the internal aspects of German reunification in 1990. And since his youth, Schäuble, born in 1942 in southwestern Germany close to the French border and the son of a tax adviser, is a firm believer in European integration.

He was the co-author of a legendary paper in 1994 (Schäuble-Lamers Paper), according to which Germany, France, Belgium, the Netherlands, and Luxemburg—so-called core Europe—would integrate much faster and more deeply than the rest.

Like his long-term mentor Kohl, Schäuble has always considered the euro to be something like a hidden hand: monetary integration would force the EU to do what member states are reluctant to do—accept that political union, meaning much deeper, almost federal integration, is a historical necessity. Political union meaning a joint budget, taxes, and even eurobonds, sharing liability for debts.

The need to make it work would confront governments with the hard choice of either abandoning the euro or taking a great leap forward toward a federation-like entity, abandoning core elements of sovereignty.

An opportunity not to be wasted

This is where Europe is now, in Schäuble’s view. The Greek crisis was not part of the plan, but it is an opportunity not to be wasted.

For Schäuble, however, deeper European integration can only work with like-minded, well-governed countries. The way the Syriza government in Athens has behaved, rolling back reforms and treating fellow eurozone governments like enemies, convinced him that such integration is unlikely to succeed with Greece.

Schäuble wants to move ahead now because he feels that the eurozone is fragile and that time is running out. His ambition is to become the architect of a eurozone that is viable in the long term, with members that sign up to the same policies and with capable and competent institutions.

German Chancellor Angela Merkel, by contrast, cares much less about the euro. She doesn’t believe in much closer union; she is an intergovernmentalist, preferring strong member states running the EU rather as a loosely connected club. But at the same time, she has no alternative answer to the euro challenge, that’s why she agrees that to work in the long run, the common currency needs a stronger political and socioeconomic framework shared by members.

Merkel, however, has over time become a big fan of the EU. Schäuble is a typical West German Europhile, seeing the EU as some kind of redemption for a nation state that lost its legitimacy in the Nazi era and needs to be embedded in a strong European Union.

Merkel, by contrast, grew up in East Germany under Communism. It took her quite a while to appreciate the added value of the EU. For her, the big, tangible advantage of the EU is that it allows Berlin to multiply its weight (if it manages to convince its EU partners). Unlike for many Germans who grew up in West Germany, for Merkel the nation-state is not a problem.

But Greece has turned from an internal EU issue into a geopolitical challenge. Merkel has two major concerns: one is the economic future of Europe in a more competitive world; the other is the set of aggressive, neo-imperalist policies pursued by Russian President Vladimir Putin. She fears that a breakdown of order in Southeastern Europe would be exploited by the Kremlin, which seeks to gain influence in what has been termed Europe’s soft underbelly.

And Merkel doesn’t fully believe those experts who claim that the fallout of a Grexit can be contained. For her, the risks of a Grexit leading to an implosion of the eurozone and the euro are not negligible.

Different priorities

Schäuble and Merkel have different priorities and a different risk assessment. That’s why there is sometimes tension. But ultimately Schäuble knows who is in charge. He is trying to advance his agenda but knows where to stop. Keeping Greece in the euro was Merkel’s decision, and he dutifully supported it.

What Merkel did in the latest showdown with Greek Prime Minister Alexis Tsipras was to use Grexit as a stick to gain leverage.

The more credible the scenario of a Greek exit from the euro, the more likely it would be that Greece would sign off on the conditions set by the creditors for the third bailout.

However, the game is far from over.

The future of the eurozone and of the EU will be decided in many European capitals. Paris and Brussels will be first among them, but Berlin will also be key. Germany has become the EU’s centre of gravity in the last years, because of its own weight and the relative success of its economy, but also because of the country’s deep commitment to the EU.

Unlike in most other EU countries, all major parties in Germany are enthusiastically pro-EU, and the political class still signs up to federalism as the ultimate vision for Europe’s future.

The most likely scenario is further muddling through.

The recent showdown with Greece was damaging. We will hear some talk about further integration, political union, in Paris and Berlin, but the two sides won’t agree on what that means, as in the past. Greece will get its bailout with conditions that are not going to be seriously enforced. There will be grumbling here and there, but everybody will be relieved to go back to business as usual.

Until the next crisis strikes.

Ulrich Speck is a visiting scholar at Carnegie Europe

Germany approves talks on new Greek bailout

The Bundestag Friday voted to open negotiations for a third aid programme for Greece but the number of rebel centre-right MPs voting No grew from 29 in February to 60.

Greek government's steady steps to exit bailout programme

Growth predictions are positive, exports increasing, unemployment dropping and credit-ratings up, says the head of Greece's Syriza delegation to the European Parliament. Now the government in Athens is looking to design its own reform programme.

Analysis

We are not (yet) one people

Talks on the next EU budget will start on Friday. Brussels wants to do much more than before – and needs a lot more money. But arguing about funds won't be enough.

Intellectual property protection - the cure for Europe's ills

The European Commission is considering rolling back medical research incentives, on the faulty assumption they are somehow driving higher drug prices. But not only is that premise flawed – the proposed fix will do nothing to benefit ordinary health consumers.

News in Brief

  1. EU calls for immediate ceasefire in Syria
  2. UK's post-Brexit vision is 'pure illusion', Tusk says
  3. EU leaders express solidarity with Cyprus in Turkey drill row
  4. EU to double funding for Sahel forces
  5. EU parliament president: 'The immigration problem is Africa'
  6. May to unveil EU departure strategy next week
  7. Pregnant workers may be dismissed, EU court rules
  8. Romanian minister demands anti-corruption prosecutor fired

Stakeholders' Highlights

  1. ILGA EuropeAnkara Ban on LGBTI Events Continues as Turkish Courts Reject NGO Appeals
  2. Aid & Trade LondonJoin Thousands of Stakeholders of the Global Aid Industry at Aid & Trade London
  3. Macedonian Human Rights Movement Int.European Free Alliance Joins MHRMI to End the Anti-Macedonian Name Negotiations
  4. Mission of China to the EUChina-EU Tourism Year to Promote Business and Mutual Ties
  5. European Jewish CongressAt “An End to Antisemitism!” Conference, Dr. Kantor Calls for Ambitious Solutions
  6. UNESDAA Year Ago UNESDA Members Pledged to Reduce Added Sugars in Soft Drinks by 10%
  7. International Partnership for Human RightsUzbekistan: Investigate Torture of Journalist
  8. CESICESI@Noon on ‘Digitalisation & Future of Work: Social Protection For All?’ - March 7
  9. UNICEFExecutive Director's Committment to Tackling Sexual Exploitation and Abuse of Children
  10. Nordic Council of MinistersState of the Nordic Region 2018: Facts, Figures and Rankings of the 74 Regions
  11. Mission of China to the EUDigital Economy Shaping China's Future, Over 30% of GDP
  12. Macedonian Human Rights Movement Int.Suing the Governments of Macedonia and Greece for Changing Macedonia's Name

Latest News

  1. EU agrees budget to focus on defence, security and migration
  2. EU leaders nix transnational lists, cool on 'Spitzenkandidat'
  3. Regions chief: calls for smaller EU budget are 'impossible'
  4. Election fever picks up This WEEK
  5. EU-Morocco fishing deal casts doubt on EU future foreign policy
  6. EU leaders put 'Spitzenkandidat' on summit menu
  7. European far-right political party risks collapse
  8. The key budget issues on EU leaders' table

Stakeholders' Highlights

  1. Swedish EnterprisesHarnessing Globalization- at What Cost? Keynote Speaker Commissioner Malmström
  2. European Friends of ArmeniaSave The Date 28/02: “Nagorno-Karabakh & the EU: 1988-2018”
  3. European Heart NetworkSmart CAP is Triple Win for Economy, Environment and Health
  4. European Free AlllianceEFA Joined the Protest in Aiacciu to Solicit a Dialogue After the Elections
  5. EPSUDrinking Water Directive Step Forward but Human Right to Water Not Recognized
  6. European Gaming & Betting AssociationGambling Operators File Data Protection Complaint Against Payment Block in Norway
  7. European Jewish CongressEJC Expresses Deep Concern Over Proposed Holocaust Law in Poland
  8. CECEConstruction Industry Gets Together to Discuss the Digital Revolution @ the EU Industry Days
  9. Mission of China to the EUChina-EU Relations in the New Era
  10. European Free AlllianceEnd Discrimination of European Minorities - Sign the Minority Safepack Initiative
  11. Centre Maurits Coppieters“Diversity Shouldn’t Be Only a Slogan” Lorant Vincze (Fuen) Warns European Commission
  12. Dialogue PlatformWhat Can Christians Learn from a Global Islamic Movement?

Stakeholders' Highlights

  1. European Jewish CongressEJC President Warns Europe as Holocaust Memory Fades
  2. European Free AlllianceNo Justice From the Spanish Supreme Court Ruling
  3. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  4. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  5. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  6. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  7. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  8. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  9. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  10. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society