Berlin Rules: Why, What, How, and is that so?

The three books under review deal with Europe, but their focus is Germany. Paul Lever, former British ambassador to Germany, is the author of Europe and the Germany Way: Berlin Rules, I.B.Taurus, 2017. Yanis Varoufakis, former Greek Finance Minister, authors Adults in the Room: My Battle with Europe’s Deep Establishment, Bodley Head, 2017; and Douglas Murray argues the case, inherent to his title, The Strange Death of Europe: Immigration, Identity, Islam, Bloomsbury, 2017.   Merkel opened Europe’s doors wide to immigration from the Moslem world as an act of expiation of Germany’s sins in the second world war.

All share one common view that Germany is on top, and Europe is in trouble. But they come at their arguments from different angles. Paul Lever’s position is that Germany is consistent in pursuing its national interest; Yannis Varoufakis considers this nationalism a major break with the spirit of post-1945 European integration; Douglas Murray argues the case that European élites subscribe to an ahistorical doctrine of postmodernism, which dictates that modern European citizenship is or should be available to whoever wishes to acquire it. Quite clearly, a common strand among all of our three authors is that the trauma from Europe’s wars is far from over.

Let us start, though, with two books, one by Larry Siedentop, Democracy in Europe, published in 2000 byAllen Lane, and the other, a volume edited by the late Professor Jack Hayward, entitled Leaderless Europe, Oxford University Press, 2008.

Siedentop warns against the bureaucratic Europe, which French élites have imposed, and he fears, are continuing to impose on the continent. In the key relation between France and Germany,” …it is clear that France has been the dominant partner, providing the will and defining the objectives for Europe”. But is has done so as a projection of French foreign policy, and has not sought to create a culture of consent, “a far more precarious undertaking”. Human rights may serve as a template for a new Europe, but they are rooted in Europe’s Christian heritage, which in effect preaches, unlike Islam, the radical equality of individuals, rather than their unquestioning obedience to the law. In Europe, he rightly observes, “the democratic principle has been hedged about by memories, instincts and manners which had their origins in a more stratified society”, and that “give a richer, more complex texture to European societies”.

“The danger, he writes, of premature federalism in Europe-of the rush to political integration which turns federalism into little more than a unitary super-state-is that it could put at risk the complex textures of European societies”. “The history of Europe, the formation of these nation-states, survives in their distinctive political cultures”. Beware the nationalist backlash, Siedentop warns, if Europe continues to be “propelled towards a federal state by a national political class (he refers to France) which does not really admire or pursue the values intrinsic to federalism-the formal dispersal of authority and power, checks and balances, and maximising popular participation in the political process”. “Federalism is the right goal for Europe. But Europe is not ready for federalism”.

The backlash was not long in coming. Under the direction of former President Giscard d’Estaing, the convention of 2002 to 2004 drew up a European Constitution, which was ratified by 18 of the then 25 member states, including two referenda in Spain and Luxemburg. In February 2005, Spanish voters ratified the treaty with 76% voting in favour to 24 against, an indication of the fundamentally pro-EU attitude in Spain which looked to “Europe” as the alternative to General Franco’s dictatorship. But then in May, the French public rejected the Constitution by a margin of 55% to 45% on a turnout of 69%: the primary reasons were hostility to neo-liberal economic policies and concerns about national sovereignty.  Just three days later, the Dutch rejected the constitution by a margin of 61% to 39% on a turnout of 62%: the primary reason in The Netherlands was disillusion of Dutch voters with their governing élite; concerns about immigration, Islam, and The Netherland’s declining influence in a wider Europe, and not least to a Project Fear campaign by Yes supporters of the consequences of rejection.

Rejection did not prevent the Constitution’s authors ploughing ahead with their project: as Valery Giscard d’Estaing stated, the EU Treaty of Lisbon, was fundamentally the same as the Constitution. (Readers May like to observe how Giscard blames the British for his original draft not making it through the process-as if the British voted in the French referendum. The reason is, of course, that he is playing on the Sense of guilt felt by readers of The Independent about all matters European.)

Jack Hayward’s volume, written in the wake of the Constitution’s repudiation in two founder members of the project, provides an explanation of why “Europe” had moved from an initial phase of “imaginative innovation” to one of “lacklustre routine indecision.” In drawing up their Constitution, Hayward writes, the leaders substituted their own preferences for those of the publics they were supposed to represent. Echoing Siedentop’s statement that it is too early for Europeans to accept federalism, Hayward makes the crucial point that the EU lacks a demos; it therefore has to fall back on a “combination of indirect democratic legitimacy through member state leaders, and non-democratic institutions…to which the intergovernmental European Council and Council of Ministers are not accountable”. The professional description of the EU is that it is a glorified “consociational democracy”: business is transacted behind closed doors between leaders who have to bring back the booty to their followers. The European interest is at best the sum of individual members’ interests. Martin Schulz, the Chancellor candidate in the recent German national elections, is blunter: the EU, he says, is a Frankenstein monster, where the Council is both executive and legislature, and not answerable to a European electorate. His solution is a full-blooded United States of Europe by 2025.

Clearly, Schulz believes that there is a European demos.

The following sections will lay out the main theses of our authors first, and then I shall discuss some of their key points, to draw conclusions about the state of Europe towards the end of this decade. One of the more obvious points to lead off with is that hardly had Jack Hayward’s book been published than Europe acquired a leader in the form of Chancellor Merkel. The Europe she proposed was a Europe run on German preferences. We see the results all around us.

Berlin Rules.

Paul Lever presents a powerful case that Berlin rules. Since the Treaty on Fiscal Union in 2012, the rest of Euroland has signed up to Germany’s own policy of binding legal commitments to balanced budgets. Merkel had the decisive voice in deciding EU policy towards Greece. She was the driving force in the negotiations with Putin over the Ukraine leading to the Minsk agreement providing for a ceasefire and a de-escalation of the conflict. In June 2015, Merkel said Germany would take in anybody from Syria, opening the floodgates to mass immigration in Europe. On Brexit, it was Merkel who insisted that the “four freedoms”, notably on free movement of people, were intangible. German political groupings dominate in the European Parliament; Germans hold key positions in the European Commission; the President of the Commission, the Luxembourger Juncker, is a willing tool of German policy. “Provided, Lever writes, that the EU’s economic framework is established on a legally binding basis to reflect the German model, the Germans are willing to allow the European Commission, the European Parliament and the European Court of Justice to exercise authority on a scale that most people in Britain would find unacceptable”.

The root of German power in Europe is “die Wirtschaft” which in Germany means much more than “the economy” does in the English language. In the English language, “the economy” refers to the dominant utilitarian paradigm predicated on a separation of politics and economics, that describes a market process in which the government “intervenes”. In German, “die Wirtschaft” refers also to the major corporations, the great Mittelstand firms, the web of small business, and the institutions in which they are embedded. Die Wirtschaft is predicated on priority to producers; the “economy” places the consumer as king.

These institutions include the “social partners”-unions and employers, the Federal Cartel Office, the independent Bundesbank, and the Constitutional Court. Underpinning this edifice is the commitment to training of workforce and management, and a corporate governance structure predicated on the idea that companies do not just exist for the benefit of shareholders, but of their employees, too. The result is a big national economy, specialised in manufacturing, good at exporting, with solid public finances and a high level of social solidarity and security. If corporations have to cut back, the tendency is for boards to choose to do so in countries where local labour laws are less strict than in Germany.

Lever rightly emphasises that corporate ownership is much more defuse than it was in 1990, when cross-shareholding between German corporates, banks, and Allianz-the giant insurer- was still widespread, and corporations owned each other’s shares and shared each other’s boardrooms. But divestment of shares has not gone along with a wholesale capitulation to the ideology of shareholder value: managers in Germany tend not to live in fear of hostile takeovers. The export intensive Mittelstand firms keep their deep ties into the regional banking networks, and reinvest their profits in technical innovations.

Germany, furthermore, has absorbed eastern Germany, and has turned out to be by far the greatest beneficiary of the Euro. For decades, the West German exchequer transferred the equivalent of 6% gdp in transfers to eastern Germany, an experience which has crucially influenced attitudes in Germany to the Euro. Germany negotiated the conditions for establishing the Euro in the Treaty of Maastricht-no bailouts, no transfers, no mutualisation of debt. In 1998, Lever reminds us, the expectation was that Euro membership would include Germany, France, Benelux, Austria and Finland. But, he writes, the Commission recommended that Italy, Spain, Portugal and Ireland join. Greece joined in 2001. I put a different interpretation on the matter of Euro membership: it was France that insisted there should be an enlarged Club Med membership in order to have a pro-growth caucus in Euroland. This interpretation, with which Siedentop concurs, casts rather a different light on the post-2010 crisis in the EU.

Germany is perfectly at ease with the idea of a federal European construct. It corresponds precisely, Lever reminds us, to the way that Germany is governed. Taxes are raised by the Länder, as is the case in the EU; voting in the Bundesrat is weighted, but smaller population Laender weigh proportionately more than their numbers. The federal government has no responsibility for education, and the Bundestag is not the dominant feature of German public life, as the House of Commons is in the UK. “When it comes to the structure of power, the nature of the bodies which exercise it, and the procedures through which they do so, the EU is not a French paradigm. It is Germany writ large”.

It follows that for Germans, the world of the EU is familiar from their domestic experience: the division of responsibilities between the Council and the European parliament duplicate those between the Bundestag and Bundesrat. The same can be said about the ECJ and the German Constitutional Court. As Lever points out, almost any controversial legislation from the EU is likely to produce a challenge in the Constitutional Court. This holds in particular for EU laws adopted by qualified majority voting, but that can be challenged on the grounds that they are incompatible with the German Constitution. As he writes—and this is a crucial point-the constitution, as interpreted by the Constitutional Court, takes precedence over anything emanating from Brussels. The Court’s position is that EU actions are illegal if they depart from the terms under which the Bundestag has ceded that power to the EU.

In post-1945 German mythology, 1945 was Stunde Null-a fresh start. Over time, this idea of fresh start has developed into a country without a past. “For a country that has renounced its past, a new political entity like the EU offers a particular opportunity.” “Europe can be admired, extolled and celebrated in a way that Germany cannot”. The underlying assumption in Germany, as among UK Fabians and French Euro-enthusiasts, is that the nation states of Europe failed in the past to prevent wars and that therefore the nation state itself is inadequate as an instrument of governance.

Yet for all that German politicians talk about Europe, there are two major impediments identified by Lever  to Germany becoming an enthusiastic devotee of a fully integrationist future. The first is that the EU consists of nation states whose citizens are comfortable with their existing nationalities. Moreover, many of them take pride in their histories. As Lever points out, rejection of their past by Germans, makes them insensitive to partners who have pride in their own pasts. The second impediment is that Germanness is defined by race and by culture. You are German by descent. If you acquire German nationality, you are expected to renounce your nationality of birth, and devote yourself to buying into German social culture, rather than to maintain an identity of your own which is different. In other words, the German people are not about to melt into a European demos.

As Lever points out, German readiness to listen to others has become more circumscribed. For decades, the mantra was that Franco-German relations were the driving force behind what did or did not happen in the EEC/EU: from Adenauer and de Gaulle to Mitterrand and Kohl, the French and German leaderships worked out their common positions, which in turn tended to set the agenda for the rest of the membership. Not so since Chancellor Merkel. The Lady, as I have noted in previous blogs, learnt from her predecessor, Gerhard Schröder, how to say Nein. On Poland, Germany has opened its labour markets, includes Warsaw in its discussions with Russia on the Ukraine, but insists on the EU imposing immigrant quotas to EU member states, presses ahead with the Nord Stream gas pipeline to link Russia, despite Warsaw’s misgivings, and backs the Commission in its threat to impose sanctions on Poland for allegedly politicising the system of judicial appointments. On the Polish judiciary, the Polish government responds that the existing Polish judiciary is a relic of the communist party-state. The argument is dismissed by Berlin and Brussels.

On relations with the UK, Merkel is treading in the footsteps of her predecessors. The Bundesbank pulled the plug on sterling’s membership of the ERM in 1992, and voted with France against the UK on the EU directive on the resale rights of artists. Germany is at the forefront of opposing liberalisation of its service sector, where the UK has an advantage. Berlin appreciated the UK as a pro-free trade member of the EU, but Merkel did nothing to help Prime Minister Cameron get a meaningful renegotiation, that he could credibly present to the British voters in 2016. Initially, German public opinion was pro-President Obama, but turned against his Presidency when it was revealed that the US National Security Agency was eavesdropping on Merkel. As Lever says, “the old familiarity with the Washington establishment has faded”. Germany and the US lead, in his words, parallel lives.

Lever discusses Berlin’s commitment to “political union” and does not dismiss the possibility that in 20 years time, the EU may have one seat at the UN Security Council, may field only EU embassies around the world, may speak with one voice in world affairs and may have a military force. But he is sceptical. Full political union would mean policy in the hands of the Commission, common tax rules, central funding of infrastructure projects, and a common foreign and defence policy. But Germany opposes the pooling of debts, abstained from French and British policy on the deposition of Khaddaffi in 2011, and promotes national interests in Brussels. What we should do is not to focus on what German politicians say, so much as what they do, he advises. They talk of EU defence but their preferred organisation for matters of security remains NATO.

The shape of things to come in Europe is therefore more of the same. The European super-state, predicted by British Eurosceptics (and it should be added, promoted in the EU’s Five President’s Reports, President Juncker’s State of the Union speeches, and by former Belgian Prime Minister Guy Verhofstadt) is most unlikely to come about. Merkel, Lever points out, is not interested in institutional tinkering. She is aware of demands for further enlargement of EU membership to include Georgia and Moldova, but she is also aware of the risks of the Ukraine’s accession. Meanwhile, Germany is for a small EU budget; no bailouts; pressure on smaller member states to raise corporate taxation; tighter regulations on banks; and no liberalisation of services.

Essentially, Germany is comfortable with the status quo. As my Bavarian niece says, “Hauptsächlich mir geht’s gut”-which roughly translates as “everything is fine as long as I am fine”. And much is fine for Germany in the EU. The EU provides a multilateral forum within which Germany can relate with its neighbours, bilaterally when it wishes to or has to, and multilaterally, when it prefers to hide behind the veil of the EU’s institutions. But equally, there are some things which are less than fine, and the most important of these, in Lever’s account are the emergence in German politics of a hard left and a hard right; the shrinkage of the political space where political parties remain sufficiently salonfähig to take part in discussions on forming a government; and the way that immigration from alien cultures rubs up against the German sense of identity by culture and by descent.

The changing party political landscape has become prominent in the current difficulties Merkel has in negotiating a coalition government. Her CDU-CSU party confederation fell to less than one third of the vote in the recent general elections; the SPD, down to one fifth of the vote, is asking for a United States of Europe by 2025; the Green party stands for open borders on immigration; the CSU in Bavaria, and the CDU as well, now have a competitor on their right, the newly minted AfD (Alternative for Germany), and the FDP is free market oriented but soft on social liberal issues, where the CSU and CDU have to harden up or lose a chunk of their electorate to the AfD.

Beyond that is the presence of Die Linke, essentially the ex-communist party of the old GDR, well entrenched in eastern Germany. Its platform involves widespread nationalisation of the “means of production”, and its message is that class war is the norm in a capitalist society. Circumstantial evidence for this exists in the form of widening inequalities, particularly on income, combined with solid growth in productivity, stagnant wages, rock bottom interest rates, and corporate coffers filled by the exports of a Euro which is grossly undervalued for German conditions. This is expressed in a massive trade surplus, notably with the rest of Euroland, despite the EU rules on excessive current account surpluses.

In other words, everything is far from fine in Germany, and much of what is not fine has to do, still, with the two major events of 1990: German unification, and the creation under French pressure, with Italian support, of the single currency.

Adults in the Room.

Yanis Varoufakis’ book is very different. While Lever’s reads like an ambassador’s valedictory epistle on what he learnt during his years in Germany, Varoufakis is a political kiss n’ tell account of his six months as Greek Finance Minister in the early part of 2015. It all ended on 11-12 July 2015 when the Greek Prime Minister, Tspiras, overrode his Finance Minister and capitulated to German conditions. Those were that Greece could stay in the single currency, and accept draconian policy measures, or leave the Euro, and reinstall the drachma. Tspiras chose staying in the Euro and under the German-Dutch boot.  As he writes, “I witnessed first hand the particular circumstances and immediate cause of our continent’s descent into a morass from which it may not escape for a long, long time”.

The message is the same as Lever’s: Germany rules; its national interests have priority; the EU institutions are vehicles of German policy. As he points out, saddling Greece with a debt which it could not pay back was contrary to any intelligent economic policy. Had there been adults in the room of EU policy, the EU institutions, Berlin and the IMF could have made the new Greek government an ally in pushing through vital reforms on tax and spend, but coupled with a much longer repayment schedule that would have enabled growth to resume.

In this, he was and is supported by a cluster of senior economists, including Larry Summers, Geoffrey Sachs or Joseph Stiglitz-all Americans may it be noted, the lack of leading European economists it may be surmised, because it does not pay to speak truth to power in the EU. This is of long standing: one of the best books on the creation of the Euro, The Rotten Heart of Europe, is by Bernard Connally, former chief economist for financial affairs in the European Commission. He was sacked, and harassed for warning Europeans of the reasons for, and the likely outcomes of, a single currency in a very diverse region of the world.

But support came there none for Greece from the EU. The so-called liberal establishment of the EU, writes Varoufakis, launched its ferocious campaign against “the pro European, democratically elected government” of Greece. It did so, he writes for fear that Greece’s bankruptcy might cause them “to lose political control over Europe”. But by shovelling more debts onto an already bankrupt country, they converted Greece into a debtor’s prison; They raided its tax base, plundered its pension funds, and placed new loans on a country with a shrinking income. In so doing, they definitely scared other popular movements, which were springing up against the EU imposed austerity policy delivering mass unemployment in southern  Europe, deepened Greece’s bankruptcy, spread widespread misery and prompted emigration of Greek youth in their droves.

Why did Germany, the EU and initially the IMF promote such harsh policies? Greece, after all, is a very small economy, which as Varoufakis rightly states, should never have joined the Euro. But once it had, and the veil of lies lifted in 2009 over the true state of its public finances, a policy mix of combined Euroland underwriting of debt, together with strict measures on government finances, and incentives for compliance in the form of performance based loans and credits through for instance the EBRD or the EDB, could have dealt with the small economy of Greece, and steadied markets concerned about bank loans to Spain, Italy, Portugal and Ireland. All of these member states had followed tight fiscal policies in order to comply with Euroland membership conditions-something that France and Germany had not done in 2003.

The immediate reason, spelt out in previous contributions of mine on this blog, was that the three big French banks’ outstanding loans to countries on the European economy’s periphery amounted to twice the size of the French economy. Germany’s Landesbanken had also leant hand over fist to peripheral countries during the boom years of 2001 to 2008. In other words, the banking systems of Europe’s two major economies were dead. Greece, writes Varoufakis, was the canary in the mine that tweeted impending trouble. The trouble was measurable in that both France and Germany had about Euro 1 trillion at stake. Had Greece declared that it was bankrupt, in other words if Greece had told the truth, the pack of continental financial cards would have collapsed. Simply, bailing out Greece shifted the burden of bailing out French and German banks from the taxpayers of France and Germany, to the taxpayers of Greece. As President Juncker is quoted as saying: “When it becomes serious, you have to lie”.

This could be achieved because the Eurozone, as Varoufakis repeatedly states on the conference circuit, is a democracy-free zone. As he was told by Germany’s Finance Minister Schäuble, elections should not be allowed to change economic policy. Once member states had signed up to the Fiscal Pact, it mattered not a jot what electorates concluded in national elections. The result has been that the EU has been instrumental in defenestrating two elected Prime Ministers, and crushing the aspirations of millions of people.

As Varoufakis states in his conferences, the EU that we knew from previous decades, an EU where national interests were always present but tempered by a shared culture of give and take, is no more. It no longer exists. Everything that the EU does promotes disunity: Brexit, the 35% vote for Marine le Pen in the presidential elections; the 43% of the French electorate which bothered to turn out for them; the political crisis between Madrid and Barcelona. Unless, Varoufakis concludes, the EU is “Europeanised”, in other words that it transmogrifies into a USE, it has no future.  Europe as is, he argues has no answers; President Macron’s proposal for a federal-lite union is dead in the water, not least because of the fragmentation of the electorate in Germany.

Varoufakis reports extensively on the post-2010 power relationships in the EU. He recounts his meeting with Michel Sapin, then France’s Finance Minister. Varoufakis is met with open arms. “Your  government’s success, Sapin is quoted as saying, will be our government’s success.” In other words, we are in this together in pushing for a growth-oriented policy. Then the two go out to meet the press, and Sapin sounds like his lines have been written from Berlin. “Who are you, Michel”, asks Varoufakis. Sapin replies: “You must understand that France is not what it used to be”. Varoufakis later goes on to have Schäuble direct a piercing look at Sapin, to repeat his line that elections cannot be used to change economic policy. In other words, Greece is being treated in the way it is also to serve as a warning to France what happens if it decides to step out of line.

Varoufakis recounts how Germany has established itself as the power through which policy runs in Europe. Berlin brushes aside Washington’s arguments in favour of an expansionary policy in Europe: no longer dependent on the US for its security, the old exchange rate between currency rates and security, which existed during the cold war, no longer pertains. He recounts that Washington essentially considers Greece in Germany’s sphere of influence. Putin tells Tspiras to come to terms with Merkel. Beijing does the same. Varoufakis recounts a dinner with the Chinese ambassador on February 15, 2015. Unlike radical members of his party, Syriza, Varoufakis says that he welcomes Cosco’s big investments in the Piraeus port. The ambassador is delighted and reports back to Beijing. Beijing promises to purchase Euro 1.4 billion in Greek T-bills. Then it transpires that Beijing buys only Euro 100 million worth. Varoufakis has Tsipras report that “someone” from Berlin phoned Beijing with a blunt message: stay out of any deals with the Greeks, until we are finished with them.

Varoufakis recounts how Germany uses its power. The short description is ruthlessly. Greece is a handy scapegoat to deter supposedly profligate Latins who might get it into their head to plough separate furrows. The Netherlands is a crucial partner for the German government.  Berlin builds coalitions carefully in the EU. If Siemens is caught with its hand in the Greek till, distributing corruption, nothing more is heard of the case. Merkel often plays good cop to Schäuble’s bad cop, and makes ingratiating statements that the gullible, like David Cameron, tend to take too literally. Sometimes, Merkel intervenes overtly in the domestic politics of countries: the internal opposition to Varoufakis came from within his ministry, with Berlin’s connivance. Varoufakis states that Merkel ordered the pathetic President Hollande to keep his Minister for the Economy, Emmanuel Macron, out of the Greek negotiations. Fake news is abundantly used to discredit opponents.

Varoufakis ends his book with a clear statement that the “deep establishment” of the EU is spawning a nationalist international that can only be countered by creating a pan-European, democratic, humanist movement of “progressives”. He refuses to accuse Germany of nationalism, because he wishes to appeal to potential supporters across national frontiers. But the message of his book is only too clear: when German and Greek interests collide, Greece gets crushed. Realpolitik, as I have argued elsewhere on this blog, is alive and well in Europe.

The Strange Death of Europe.

Lever argues that Germany has no coherent policy on how to use its power in Europe, other than to defend its national interests, and those as often as not tend to be narrowly drawn. Varoufakis eschews accusing German leaders of nationalist policies, but his book cites chapter and verse. Neither author grapples easily with Professor Willy Paterson’s definition of Germany as a reluctant hegemon. Paterson presents the thesis with a question mark: leadership has been thrust upon a reluctant Germany. I would agree with much, but not quite all of this thesis. Definitely, it  was not Germany that pushed for a single currency, but the Delors Commission with powerful backing on Paris and Rome. For twenty years after Germany’s reunification, Berlin strained to conceal the growing disparities in power and influence between Paris and Berlin.

Then came the Greek crisis of May 2010, and Merkel dropped the pretence. Henceforth, the habit of leadership has become familiar, and Europe has to become more German. French objections have been brushed aside. President Hollande won the presidency on the false premise that he could get Berlin to change policy direction. He was soon brought to heal. Varoufakis of course agrees. But he adds that German leaders, are players in a Greek tragedy: they can only take actions in defence of their own interests, that are arguably not in their interest. For instance, they cannot play the Euro payer, and continue to have their businesses compete successfully on world markets. Merkel has never ceased saying that Europeans have 7% of the world population; 25% of world gdp; and 50% of “benefits” distributed via government budgets. Her argument is that European welfare states are unsustainable, and on this she is most definitely correct.

Germany is not prepared for its leadership position. Both Lever and Varoufakis are on the same page here. Lever rightly says that Germany is an exemplary constitutional democracy, pursues its national interests and is quite comfortable with the status quo. Varoufakis essentially says Germany is on top, nationalisms are spreading, the EU is an outdated institution not fit for purpose, and cannot continue as it is. Douglas Murray takes the gloom a whole stage further: Germany is leading Europe to commit suicide. The future is not some glittering prospect of a united Europe, sitting at the top table with the great powers of the 21st century, but a demographically challenged Europe that feels guilty about its past, and wishes to dissolve itself into a multi-cultural world where anybody who wants to live here can come with their own cultural baggage and live as equals with the natives. Europe acts, says Murray, as if its civilisation is no longer worth defending.

He sees “two simultaneous concatenations” coinciding from which he believes it is next to impossible to recover.

The first is the mass immigration of peoples into Europe. In all western European countries, this process began soon after the end of the world war. The 1948 British Nationality Act allowed immigration from the Commonwealth. UK textile firms in Yorkshire imported workers from Pakistan and the subcontinent. As the influx of labour escaping socialism dried up in the late 1950s,  Germany concluded Gastarbeiter accords with Turkey; France, the Benelux and the EEC of the time signed migrant labour agreements with Portugal, Spain and after the end of the Algerian war, with both Algeria and Morocco.  Over time, the workers stayed, and settled. He writes that “what had been Europe-the home of the European peoples-gradually became a home for the entire world. The places that had been European gradually became somewhere else”. The trend accelerated in the 1990s and beyond

In 1998, the Blair government opened the UK’s door wide to immigration. Barba Roche as Blair’s Minister for Asylum and Immigration introduced a policy whereby all people claiming to be asylum seekers would be allowed to stay in Britain. Anybody who criticised her policy was castigated as “racist” (not racialist, because the latter does not rhyme with fascist). The result was a gathering flood of immigration to the UK, as I have pointed out in my article on Brexit: A Certain Idea of Europe, posted on this blog. By far the largest number of immigrants to the UK came from outside Europe. The number of Muslims in the UK rose from 1.5 million in 2001 to 2.7 million in the 2011 census. In 2011, “white Britons” were a minority in 23 out of the 33 boroughs of London. Poll after poll showed that the British people did not consider that immigration was beneficial, yet as Murray writes politicians and pundits alike brushed their concerns aside.

The same occurred elsewhere in Europe. The background to this is demographics. Western Europe has legalised abortion, made divorce easy, and encouraged one parent households. The region’s generous welfare states provide benefits galore, and rights that are not available in the poorly governed countries to the south. By contrast, North and sub-Saharan Africa population have up to 70 to 80% of their population under 30; official unemployment rates range between 10 to 20% of the employable labour force; monthly wage rates range from 120 to 170 dollars a month; African and Mid-Eastern countries are way down the international rankings on governance and corruption.

The so-called Arab spring of 2011, followed by  the deposition of Ghaddaffi in Libya, opened the floodgates to immigration. Paris and London, with the backing of Washington DC but without Berlin’s accord, intervened in Libya on the post-modern agenda of human rights. The result was that Libya became a haven for militant Islam. The western powers sought to overthrow Assad in Syria, also on human rights grounds, and backed the rebels, many of whom were Sunni or Shi-ite militants. As Syria also descended into a hell hole, migration turned into a flood, with immigrants marching across land via Hungary, by sea across from Turkey, and conveyed by smugglers to Sicily. Merkel, accustomed to taking unilateral decisions, announced in August 2015, that the doors were open in Germany to asylum seekers. “The world sees Germany as a land of hope and chances. That wasn’t always the case “said Merkel. Here is Merkel on YouTube:

That year, a million came. Crime rates soared. German police statistics reported that 1,200 women were sexually assaulted by at least 2,000 men, acting in gangs. Similar scandals had been going on for decades across England, where Pakistani gangs were “grooming” under age white girls.

The second of Murray’s “simultaneous concatenations” is that Europe has lost faith in “its beliefs, traditions and legitimacy”. One source of this, he argues is that Europeans have lost what the Spanish philosopher Miguel de Unamuno called the “tragic sense of life”. They have forgotten, he points out, what Stefan Zweig had learnt: that everything you love, “even the greatest and most cultured civilisations in history, can be swept away by people who are not worthy of them”. The remark refers to Zweig’s autobiography, The World of Yesterday, first published in 1942 after his suicide in Argentina. “When I attempt to find a simple formula for the period in which I grew up, prior to the First World War,  I hope that I convey its fullness by calling it the Golden Age of Security.”

Zweig loved the Vienna of pre-1914. He knew Theodor Herzl, the founder of political Zionism; discussed poetry with the mystic, Rainer Maria Rilke; frequented  Benedetto Croce, the agnostic philosopher of political liberalism who published an article on the roots of European culture, entitled “ “Why We Cannot Help Calling Ourselves Christians”; or Hugo Hofmannsthal who he described as “this magnificent genius, who already in his sixteenth and seventeenth year had inscribed himself in the eternal annals of the German language with inextinguishable verses and prose which today has still not been surpassed.” Zweig describes the departure from Austria by train of the last Emperor, Charles, the beginning of the Salzburg music festival, the hyperinflation of the early 1920s, and the later rise of Hitler, whom he regarded as particularly evil. In the early 1930s, he authored the libretto, which Richard Strauss, turned into his opera, Die Schweigsame Frau, and he discusses his friendship as an exile in London with Sigmund Freud. The book ends with the outbreak of war in 1939.

European guilt about its past, writes Murray, takes multiple forms, including the idea that people can come from the rest of the world, bring their cultures with them, and somehow become “Europeans”. So, if being European is not about “race”, but rather about values, what are those values?  In the debates of 2002-2004 on the future European Constitution, mention of the continent’s Christian heritage was omitted despite interventions by religious leaders, including successive Popes. The new religion was to be human rights, extendable to all. The matter of the relation between Europe’s older and newly minted religions is illustrated by the case of Rocco Buttiglione, whose candidacy to head the EU Justice Commission was trashed by human rights militants in the European Parliament in 2004 on the grounds that he referred to homosexuality as a sin and to the traditional role of women in the household. He was turned down because his ideas did not match with the measures against discrimination which he would have had to implement, despite the fact that Buttiglione stated categorically that he would not put his own beliefs into effect in lieu of existing law.

Nor were the values of this new Europe to be rooted in the organising principle of the nation state. From the Treaty of Westphalia in 1648, to the twentieth century, the nation state was regarded not only as the best guarantor of constitutional order and liberal rights but also the ultimate guarantor of peace. But with the wars of the twentieth century, this certainty eroded too. Nationalism is war, declared President Mitterrand in his valedictory speech to the European Parliament. “The nation state…cannot solve the great problems of the twenty-first century”, said Chancellor Kohl in a speech of 1996. It was a matter of war and peace that the nation states of Europe disintegrate into one large integrated political union.

Europe in other words is seen as a tabula rasa, on which a new ethic of post Christian and post national modernism may be written. Its key words are “respect”, “tolerance” and “diversity”, and its guiding doctrine is “multi-culturalism”. Multi-culturalism describes all cultures as equally deserving of respect, to be tolerated, and encouraged as contributing to a diverse society. It is as Murray quotes Samuel Huntington, the American political philosopher, “in its essence anti-European civilisation. It is basically an anti-Western ideology”.

Modern Europeans, writes Murray, wallow in its waters. They believe themselves born into the original sin of racism, nationalism, colonialism. “We”, the modern Europeans declare, bear responsibility for Nazism. Imperialism, in this view, paraphrasing Lenin, is the highest stage of European culture, and the highest stage of that was national socialism. As Gerwin Strobl demonstrates in his fascinating book, The Germanic Isle: Nazi Perceptions of Britain, the national socialist leadership, and Hitler in particular, considered that to be taken seriously Germany had to be as ruthless as Britain in pursuit of its own interests, and that this meant establishing an empire, a Lebensraum, in the same way that he imagined Britain had established its hegemony in India. The advocates of British imperial misdeeds could do better than examine the two dozen or so volumes on Das Britische Reich in der Weltpolitik, published by the Deutsches Institut für aussenpolitische Forschung under the direction of  Hitler’s Foreign Minister, von Ribbentrop. But since national socialism is about the only evil they allow, perhaps they should suppress their source. If revealed, it could discredit their thesis.

Europe’s new religion of guilt entails a war on its past, writes Murray. That may be  one reason why the Brexit vote of June 23, 2016 has aroused such passions in the UK and elsewhere. A large portion of the British public has not seen the light, does not share the guilt, does not reject the past, and definitely does not agree with Kohl that the nation state of Great Britain has to dissolve into a European political union.

But rejection of a sort is coming from another source. By opening the gates wide to immigration, Europe’s élites seem to be saying, that the new immigrants will sooner rather than later, shed the cultures they come from and join the European post-modern, multi-ethnic and multi-cultural mass.

As far as Islam is concerned, there is scant evidence in favour of this thesis, and much evidence against. Through the work of the Muslim Brotherhood, and with massive financial backing from Saudi Arabia, Islam is in Europe, to conquer. Turkish Prime Minister Erdogan, and an Islamic fundamentalist, tells Turks in Germany not to assimilate. British Muslims, says Trevor Philips, the former head of the Equality and Human Rights Commission, are becoming a nation within a nation. In France, the Basilica of Saint-Denis holds the tomb of Charles Martel, the Frankish leader who at the Battle of Tours in 732 turned back the Islamic armies from conquest of Europe. As Edward Gibbon wrote a millennium later, “From such calamities was Christendom delivered by the genius and fortune of one man”. Thirty per cent of the local population around the Basilica is Muslim, and Murray reports, 70% of the children in local Catholic schools are Muslim.


What conclusions may be drawn? Larry Siedentop proved prophetic in stating that unless the process of unification in Europe paid heed to the creating of a culture of consent, there would be a national backlash. Equally, Jack Hayward is correct to state that there is no European demos. For the foreseeable future, Europe cannot venture beyond being a “consocational democracy”, where élites negotiate behind closed doors, and hope to bring back booty to their followers. Hayward labelled such a Europe as leaderless, but hardly had the ink dried on the book, than Germany took the leadership, and moved to make Europe in its own image, as Paul Lever iargues. Look at what German leaders do, not what they say, says Lever. What they do is pursue national interest, ruthlessly adds Varoufakis.

Our authors disagree about whether the status quo in Europe, in which Germany feels quite gemütlich, is sustainable. Siedentop warns that without consent it is not. But that assumes that Europe, alias the EU, is im werden, as the Germans say, a process in permanent evolution. Definitely, ex post, that has been the case. The EEC of the 1970s is a distant forebear of the EU of the 2010s. Lever is therefore right in suggesting that the EU may be federated completely in twenty years time, but it is clear that he does not think so. I would add that he dismisses concerns about the existence of a European super state too lightly: that is not what public opinion surveys indicate. As the Pew Research Center records, Euroskepticism is widely disseminated across the EU Most of all in France. In fact, British Euroskepticism is similar to Germany’s; France is way further hostile to the direction of EU policy.

Siedentop’s argument is predicated on the observation that the EU is a French creation, pursued relentlessly by France’s Napoleonic élites, particularly with regard to monetary union. I would agree wholeheartedly. Berlin, as was assumed in the UK, did not push to end the DM; the French did. And they did so in order to make monetary policy on a footing of equality with Germany. Since 1990, the French have consistently pushed for an EU fiscal arm to balance monetary policy made in a collective ECB. But Germany has resisted, and since 2010, insisted that it gets its way. It has done so quite ruthlessly, making Greece a small easily punishable surrogate for France, which unable to reform domestically in a way that would make coexistence with Germany in Euroland possible, is a shadow of itself. The Macron challenge is not therefore the achievement of a federal-lite programme, which Merkel may be able to agree on, depending on the outcome of negotiations for the coalition; it will be dependent on deep reforms in France. Put simply, that means undoing decades of labour legislation; unravelling cosy cartels; in fact, doing a Thatcher on France. My advice would be, do not hold your breath.

Our books suggest there are three options for the EU: stay put. Germany likes that, and is ready to enforce it through the EU, the ECB, and with coalitions of the willing. The Big Leap forward, proposed by Varoufakis and Schulz: the argument in favour, which Giscard d’Estaing disseminates, is that now without the British, the way is open to a federal future. It is astounding that such rubbish keeps tripping off the tongues of pundits and politicians. Simply put, the barriers to a federal future are within each one of the member states, in the subtle differentiations left by history, and by distinct political cultures. The third future is that sketched by Murray: Europe is dying, not going anywhere, and it is doing so because its dominant élites have adopted Germany’s tabula rasa to the past. “We” are all guilty, they chant. Germany is not guilty alone; other Europeans had their colonies, and look what they did. They did what they did in propagating Christianity and through competition between the powers of Europe, spilling out onto the world. Hitler proposed to imitate. EU enthusiasts tend to  accept Ribbentrop’s interpretation, but suggest that  a new, post-modern Europe has to be created.

This war on Europe’s past is a central component of the European situation. It began in the debates over who was to blame for the outbreak of war in 1914. At one end of the spectrum stood those who shouted “hang the Kaiser”, and at the other end of the spectrum are those, in Germany, who argued it was “the system”. Kohl was clearly of the latter view. The national units whose competition had occasioned the disaster, he was convinced, have to be dissolved into a political union. Interestingly enough, it is the British and the French who are most resistant to this idea. The vote of June 23, 2016 for Brexit demonstrated that the great unwashed British public does not feel guilt. The weakness in the French strategy to make Europe in a Napoleonic image is that the French élites have not been able to convince their public.

The one country, paradoxically, that has so far done so is Germany, supposedly the champion of tabula rasa. It is more appropriate, and this is my conclusion, that Germany considers that the European and German status quo is worth defending. Definitely, that is the case for the German status quo. But it is not for the European status quo: the latter can only be achieved through a loser European alliance of constitutional states, which keeps the present openness but allows much greater margins of manoeuvre to the individual states. The national states cannot be anything other than the foundation of a European order. The EU seeks to deny that, and with its Europe’s Christian and political past. It is the EU which is not sustainable.


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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12 Responses to Berlin Rules: Why, What, How, and is that so?

  1. Mark A says:

    Considering your comments about post-modernism, I was struck by Macron’s comments on the subject about two months ago. He said that “post-modernism was the worst thing that could have happened to our democracy. The idea that you have to deconstruct and destroy all grand narratives is not a good one.” And, of course, we can primarily thank French philisophy for post-modernism. So, the real question is: isn’t France the problem and not Germany? They wanted the monetary union, the USE, et cetera…


    • There is a strong case to be made that I did not make here that the reason why Germany post 2010 asserted ist position on do bail outs, balanced budgets, no collateralising of debt, is that it considered that France and Italy had not taken ist strictures, evident in the Maastricht Treaty, seriously enough. It had to “lead” to get the message through to France. The message is: Reform yourself. I have tried to tell friends in France that the only way to liberalise markets in France(this was done by de Gaulle in 1959) is to sound the national bügle, and to lead the Charge. That is what Macron is trying to do.



    Of course Germans of most political views are happy with the European status quo. Germany benefits from a currency weakened by lesser brethren to East and South, using its economic size to force recalcitrants into line when its own financial institutions are a fundamental cause of others’ pain and ignores the EU rules on persistent surpluses. As Keynes pointed out, chronic surpluses are as ethically and economically damaging as chronic debt but just as the USA was the author of Breton Woods, so Germany dictates the reality of the Euro.

    The experience of a Brexit driven by romantic Arthurian fabels as much as by any particular sense of grievance is a shock which is increasingly going to register in the coming months and years. Whether Britain leaves or not provides lesson which require a pragmatic European response.

    I will offer these.

    The hard economics of Brexit are far worse than zero sum for the UK in settling with the EU. Ignoring any political sentiment ensuring membership is seen to be beneficial compared with leaving, the main reason is that a huge amount of the hundrum business of Government is pretty well the same challenge with the same end objectives for every one of the 27/28 European countries. Increasing complexity and technology also requires in statehood management a level of expertise that even major countries do not possess on their own, let alone can be found meaningfully in the smaller countries. The modern state requires scale in order to function.

    A Brexit-induced realisation is emerging throughout Europe that Brussels is an incredible bargain enabling all 28 nations to share a single bill between them for all kinds of regulation, legislation and supervision at a collective cost not much more than any one of them would have to pay for its own national regulatory body. Certainly, whatever local or regional finessing (pandering to local vested interests?) would have been desirable is invariably seen as not worth the 28 fold increase in cost to do it at the national level.

    Britain is only just waking up to this reality. Adequately replacing Brussels even if lowered standards are deemed acceptable (they are not), the cost is so prohibitive May’s Government has scarcely begun to plan for its own independent regulatory bodies- even in areas such as Medicines, Aerospace and (dare I say it) Banking in which the UK has global leadership.

    Another practicality is Brexit is unambiguously showing that national prestige, influence and ability to stand up to globally hegemonic corporations shrinks dramatically rather than increases when an individual nation tries to “take control”. And as for any ability to argue a case from outside the EU against the EU, Phase 1 of Brexit negotiations was a rude awakening.. The way the EU27 has hung together without and at a time of Maltese and Estonian Presidencies has counterbalanced lack of overt German leadership through the Federal election campaign and the messy aftermath.

    I am convinced the federalist arguments are little more than an old liberal hurrah throwback to 25 years ago. The real European debate today given the Brits are providing the Union the unfortunate lab rats who may or may not be euthanased, is what is sensible and practical to be done at the European level and how should accountability for these pooled agencies by exercised within a democratic framework? For Germany this is as valid a question as it is for Malta.

    Equally, with Trump’s tax debt ramp, Britain’s austerity the likely author of the Brexit vote, and the Eurozone enjoying strong growth, this may be the time inside Germany and the Eurozone to recognise ordoliberalism is both friendless and damaging without any need for great institutional change in the short term.

    Finally, on populations and faiths, Brexit is again delivering a lesson. Most of us are mongrels whose heritage is mixed and religious beliefs muddled. For every Nazi, be they Arian or Islamic, thankfully there are tens of thousands of people who are not a physical menace and this is again an increasing realisation.On the other hand, Brexit is presenting millions who have British involvement with the reality of loss of European rights and freedoms. Personal suffering is on a continuum from a pain in the arse/long queues/cash costs to total destruction of individuals’ family and economic life depending on circumstances. These aren’t exceptional people, just human beings who fell in love or wanted a better life. The result is these people are becoming activists and politicised and in 2018 they will be noticed by the UK and EU alike.

    There is evidence the argument is shifting from what are effectively racial grounds for closing borders to an acceptance that immigration enriches the host country in every way. Germany which has absorbed millions of Turkish gastarbeiter from the 1960’s onwards, 5 million “Eastern Germans” from beyond the Elbe and integrated the “Osties” surely has the capacity to integrate the 1 million Syrians, especially as the physical challenge of becoming asylum-seeking refugees in the centre of Europe self-selects the young and the bright. For a nation facing a demographic hole the size which Germany faces, I predict Merkel will be perceived a hero for opening the doors in 2015 before many more years are past.


    • I Believe Religion is infinite more significant than race. Race is a biological observation, for instance, that Black people have heavier bones(I am told). It was elevated into a Political theory in the course of the nineteenth century. Predating that by a millennia or two or five, comes Religion, which is a Central component of a civilisation. As pointed out by C.A.Bayly, in his Great book Birth of the Modern World, reviewöd on this blog, Technologies accelerated since 1750 onwards, and continue to do so, thereby bring together civilisations which lived in the past apart. This will continue, but the process has to be accompanied by common Sense. In Singapore, Islam, Hindus, Christians, jews, Sikhs, agnostisch, all live peacefully together. They do so because there is one rule for all. Multiculturalism is not official policy. In the UK, it has become so. The result is very serious tensions between communities along religious lines, and a disgraceful refusal of the British State to police the Country. That is the clear lessson which has yet to be learnt by the British government. You can have Immigration as long as it is quite clear that local traditions and laws are not flouted. Murray’s thesis is that gilt offers no protection to local populations.
      On that let me give you a private example. The group of Singens I sing with here in Salzburg include Turks, Japanese, Chinese, Russians, Brazilians, Americans, Mexicans, and they, we, all Interpret some of the glories of European culture, a culture which is rooted in the Judeo Christian Heritage, to which the Lisbon Treaty express makes no reference. Its authors want to write a new Europe on a Tabula rasa. Ist not happening.



    On the sexual abuse, three large group of Romanians were rounded up during 2017 for people trafficking, running sex rings, sexual abuse of minors etc across the North of England and Midlands.
    Horrific whoever does it. On cultural assimilation and acknowledgement, there is a balance to be struck and no right/wrong answer. The same goes with sexual discrimination- manu argue feminism went too far but Metoo suggests there was a huge problem hiding in plain sight. Of course if that particular pendulum gathers the momentum it seems to be gathering, we will all become Mike Pence.


  4. Mark A says:

    So, you point out that Berlin is the de facto ruler of the EU, which I agree with. They evidently enjoy it. Why is there so much moaning about Germany having to replace the U.S. as the leader of the liberal world order (I, personally, do not agree with the premise)? Here is a recent example:


  5. Pingback: Hybrid Austria: is Vienna setting a new trend? | Writing about history, politics & economics

  6. cool stuff nice job


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