My response to: Self-righteous Germany has left guilt behind, article by Edward Lucas, The Times, December 23 2015.

Lucas article starts with his main theme:

Britain finds itself baffled by a country that’s no longer a menace and wants to make the EU work Here is the url to the article:

Here is the article: Germany has had a grotesque past and, until recently, a guilt-ridden present. Since the Federal Republic was founded in 1949, Germans of all generations have worked assiduously to purge the crimes of the Nazi era.

It was never quite enough. However much money and effort Germany put into trying to be a good European, it could not scrub away history. For allies and neighbours, putting pressure on Germany was easy: murmuring “historical responsibility” was usually enough to open wallets and silence objections.

Not any more. Europe is now facing a new Germany, self-confident to the point of self-righteousness. It dominates Europe, and is happy to do so. It enforces rules because it believes them to be right — and in Europe’s best interest.

The biggest example of this is migration. Germans feel they have done the right thing by taking a million asylum-seekers this year, a bold humanitarian gesture made on principle, at a time when almost all other European countries flinched and quibbled. Having taken the lead, Germany is now firmly asking (some would say telling) the rest of Europe to help to share the short-term costs of housing, feeding and integrating migrants in their societies too.

Recalcitrant countries can expect to pay a penalty — for example in losing access to EU payments for infrastructure and regional development. Germany is also promoting what is in effect an EU army — a border guard for the Schengen zone which can be deployed over the heads of a failing national government (read: Greece).

It is a similar story with the eurozone. Germany has bailed out the indigent south Europeans. It praises progress in Ireland, Spain and Portugal. But it expects laggards (read: Greece) to become competitive, by introducing the budgetary discipline and efficient public administration that they lack.

Germany runs European foreign policy too: it dragged reluctant eastern and southern European governments into supporting sanctions on Vladimir Putin’s Russia. In an even more startling diplomatic somersault, it is pushing for a rapprochement with Turkey — a country that it once shunned.

The personification of this is “Mutti” (mother), as Germans dub Angela Merkel. Her popularity at home is barely dented by worries about the costs and difficulties of integrating migrants. She effortlessly brushed off critics at her party conference this month, gaining a nine-minute standing ovation that would have lasted still longer had she not calmed the delegates down, telling them: “We still have work to do.” It is little wonder that Time magazine made her “Person of the Year” for 2015, calling her “Chancellor of the Free World”. Another title would have been “the Good German” — guilty no longer, but grittily determined to do the right thing.

All this is a huge problem for us in Britain — not because it is a threat to our interests, but because we do not understand it. We are conditioned to see Germany as a potential menace. Winston Churchill told Congress in 1943: “The Hun is always at your throat or at your feet.” We have twice fought world wars, at colossal cost, to prevent a German-dominated Europe. It is hardly surprising that our historical hackles rise when we see the phantom menace taking shape once more.

Yet modern Germany is something quite different. It is not burdened by Kaiser Wilhelm’s grievances about lack of colonies, far less is it licking the wounds of Versailles. It is not militaristic (indeed Nato’s beleaguered frontline states are furious about Germany’s obstinate quasi-pacifism towards Russia’s military threat). It is not revanchist (it has not the slightest desire to regain Alsace-Lorraine, Silesia or the Sudetenland). It wants a rules-based economic and political order in Europe, not the arbitrary exercise of national willpower. Mrs Merkel herself is the epitome of the cautious, conscientious modern German. Her main shortcoming has been prevarication, not bossiness.

It is easy to point at lapses in Germany’s high-horsemanship. The euro crisis has its roots in reckless lending by German savers, as well as profligacy and corruption elsewhere. The Volkswagen emissions scandal has highlighted a culture of ruthless greed and deceit in parts of German business. A planned new gas pipeline direct to Russia across the Baltic Sea will benefit German business but damage the interests of east European transit countries such as Ukraine. The migration policy irks others: Germany may be able to afford to absorb a million migrants; European countries such as Poland can’t, and forcing them to do so risks stoking a social explosion.

But the big point is that Germany wants to make the EU work. This is hard for Britons to grasp at a time when we are obsessing about leaving it. We see the EU as shackles to stop us doing the right thing. Germany sees it as an enforcer, to make sure other countries behave kindly, thriftily and responsibly. We simply cannot grasp the unstinting money and effort Germany is willing to devote to this. Instead we fantasise about a fourth Reich, in sinister disguise.

As Germany’s new Europe takes shape, we are not part of it. We could be making decisions on the bridge — where our size and diplomatic heft would naturally position us. Instead we are sitting sulkily and uncomprehendingly in a lifeboat, arguing about whether we want to be lowered overboard.

Edward Lucas is senior vice-president of the Centre for European Policy Analysis and writes for The Economist


Much of this I would agree with. One or two problems, though: Germany’s business system is deeply national and regional; the official view is that Germany has been a success and that the rest of Europe should now learn from the master; the measure of this is the current account surplus of 7.8% gdp; Germany, being the central European power, has to shape western,eastern European and Russian policy.

In addition, the Constitutional Court in its judgement on the Lisbon Treaty has stated clearly that the EU is no more than an alliance of states, being neither a federal entity nor a supranational body with powers to override the German electorate’s rights to decide on their own government’s policies, as laid down in the Basic Law of 1949. The implication is that Germany is top dog in a Europe of states, with a duty now to lead and shape.

Please note that:

if the Volkswagen story is illustrative of German big business attitudes to the EU,


if the correspondance between German officials and Gasprom is in any way indicative,

EU rules are for others and less so for Germans. At best a fig leaf of public responsibility. But little more.

By contrast, the UK entered the EEC with the 1972 Act of Accession, which stated in Section 2.1. that EU law overrides national law, ie the EU is a supranational authority. This at a time that President Pompidou’s Gaullist France was the EEC’s prime power. No other member states paid other than lip service to  the UK’s official thesis of the EEC as a de facto supranational body. Forty years or more on, this is still the fact: despite the measures for majority voting, and all the legislative activity emanating from Brussels(more than 3000 new laws added to the UK books last year), the Lisbon Treaty states categorically in an annex that the European Court of Justice has no treaty based powers. Its de facto powers are no more than a convenience for the member states.

Yet the default position of the German citizenry is reluctant support for the EU, reluctant because trust is not too high that other member states do their bit.

The default position in the UK is one of Euroskepicism, because there is still a prevalent view in the UK that it is best to be self governed.

That is clearly what most Germans think of their own country. Why is it not the case in the UK? The answer is straitforward: The Economist, for whom Mr Lucas writes so well, has long espoused the theory that nation states are fading away in this brave new world of deep technologically driven interdependence, that we call “globalisation”. The Economist only expresses thereby the UK’s official position, which is quite different from that of the British public. The British public finds it difficult to understand why its right to say no, its sovereignty, should be sacrificed on the altar of a supranational doctrine.

On the contrary, the history of Germany since 1949 has been one long struggle to recover sovereignty. The EU was a useful fiction along the way. Now that Germany is on top, its use is no more to shackle German exercise of power, ie sovereignty, as to shackle that of other member states. This it does so forcefully in Euroland and In Schengen. It is most likely to do so in other fields, for instance, the “single capital market for Europe”, which from a British perspective puts in question the centrality of German banks to corporate finance as compared to the British emphasis on capital market trading.,_but_few_.pdf

The idea that there is an internal services market around the corner is illusory: German services are deeply embedded in the federal structure of Germany and have multiple veto points to anything that would threaten to disturb their interests.

Despite the polite exchanges, and the compatibility in many areas of policy between the UK and Germany, the overriding fact is that Germany is No 1 on the mainland of Europe. So what is the question facing the UK?

There are two: should the UK be self governed so as to meet the many challenges that a German dominated Europe will undoubtedly throw up; or should the UK remain on the inside in order to ensure that the EU is used, as France once hoped it would, to moderate German power?

The strength of the self governed view is that the UK has to reduce its vulnerability to policies made to fit German, rather than UK interests. This is what the Out camp in the UK campaign are essentially arguing.

The weakness of the stay-in-to-influence argument is that in the past it has been tried and found wonting: France introduced the Euro to shackle the DM, and is now shackled by an ECB, whose policies are shaped, but not entirely so, by the Bundesbank; the UK backed the internal market, which benefited German manufactured goods trade, and also helped to consolidate London as the EU and global financial centre it is.

The German view most widely held on the crash of 2008 is that this was caused by Anglo Saxon high finance, and had little to do with countries like Germany and China running ever larger structural trade and current account surpluses. In this perspective, the onus is on Anglo Saxon finance to change. This will undoubtedly continue to be the underlying message on all legislation emanating from Brussels with regard to financial services.

The weakness of the Out view is that the SNP would undoubtedly use the victory of an Out vote to call another referendum in Scotland on independence. As William Hague has written today in the DT, the vote would be too close to call.

Hague says he will vote for In, and I tend to agree. The EU will breakup if it continues in the direction that it has over the past twenty or more years. That direction has placed a specific and unwarranted interpretation on the preamble’s phrase of the goal for “ever closer union”: the clause in fact says ever closer union of “the peoples” of Europe. Who would object?

What is objectionable is the non compliance to this goal inherent in the present direction of policy. It must be evident, even to the purblind, that the present condition of Europe, where Germany is on top and Europe is in a mess, is sustainable only at the expense of very serious ructions in Europe.

The UK position should be therefore to stay in to work for a much more flexible European entity, which effectively reduces German power, while at the same time, reducing to a minimum the vulnerability of the UK to “Brussels”, increasingly a Vorort of Berlin.

That means revision of Section 2.1. of the Accession Treaty stating that sovereignty in the UK is vested in the Crown in Parliament.  Such a move means that the UK supports the principle of representative government, and also gives its citizens and its representatives the power to challenge, question, revoke and amend any measure emanating from “Brussels” that could be interpreted as damaging to UK national interests.

Germany has acquired sovereignty since 1949; we have to do so too. Europe can only be a Europe of cooperating states. There should be grounds for agreement here, on condition that we understand difference between national rhetorics on Europe.

About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) ( His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
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