Germany on top, Europe in trouble? Discuss. Part I.

A casual answer to the essay question in the title of this book review may suggest that the two statements are causal, and that the prime cause is that Germany is top dog. Both books under review do not rush to such a conclusion, but offer more calibrated judgements. Simon Bulmer and William Paterson’s Germany and the European Union: Europe’s Reluctant Hegemon? answer their question in the conclusion that “Germany has not become the EU’s hegemon”. Douglas Webber,  the author of European Disintegration? The politics of Crisis in the European Union, ends on the conclusion, in complement to Bulmer and Paterson, that Germany alone cannot hold the European project together: “the rejuvenation  of the Franco-German tandem, he writes, …offers the best chance of offering stabilising hegemonic leadership to the EU”.

Both books are extremely well researched. Both are written by authors with decades of experience in their respective subjects. Both are based on extensive reading, interviews, and thinking. Both books, too, deserve widespread attention, not just in the hallowed halls of academe, but notably  in the major media outlets-newspapers, weeklies, radio and television- across Europe, North America and beyond. After all, their subject  is the lead state in Europe, and  the world’s prime emporium, about which in my judgement they are cautiously pessimistic.

I will start by reviewing Germany and the European Union, present the structure, and main themes, then add some comments of my own before following up in Part II with a review of Webber’s book, European Disintegration? also present the structure, and main themes, add comments, and end by linking the two books with some broader observations about Europe’s future.

Europe’s Reluctant Hegemon? 

The book is structured into 7 chapters, flanked by an introduction to frame the subject, and a conclusion. Chapter 1, Germany and European integration, is organized around the political, economic and identity dimensions of what the authors call Germany’s European vocation. The chapter is essentially historical, and reviews Germany’s role in the EU up to the time of the signing of the Lisbon Treaty  in December 2007. Chapter 2, The Sources of Germany’s European Power, focuses on the period after 2010-as does the rest of the bookThe chapter considers the EU as institutional setting for Germany; the policy fit with German institutions;  and the resources available to Germany as a potential hegemon. Chapter 3 and 4 focus on domestic politics: Chapter 3,German Institutions and EU Policy-Making: Constraints or Enforcers? presents the complex institutional structure of Germany, including the federal government, the Bundestag and Bundesrat, and two key institutions, the Federal Constitutional Court and the Bundesbank. Chapter 4, German Political Actors and European Policy: A New Politicisation? discusses public opinon, the political parties and the importance of key interest groups. The thesis developed here is that the growing salience of European policy has contributed to its politicization in Germany. Chapter 5, German European policy in the Twenty-First Century,  argues that there has been a strong continuity from the early days of European integration, and discusses German policy on key areas of internal and external EU policy. Chapters 6 and 7  are presented as particular cases of German European policy: Chapter 6, Monetary Policy and the Eurozone Crisis: The Emergence of German hegemony? analyses the post 2010 years associated with the crises in the Eurozone; Chapter 7, From Political Dwarf to Potential Hegemon? German Foreign Policy in Transition, analyses Germany’s influence in the development of the European Common Foreign and Security Policy, how German opinion has been politicised, with particular reference to the crisis in the Ukraine in 2014. The concluding chapter presents a nuanced answer to the question in the book’s title, which the authors summarize by paraphrasing a statement that de Gaulle once made about the future of Brasil: “Germany is a future hegemon, and always will be”. In what follows, I will present some of the highlights of the bookmy concluding comments will be left to Part 2.

The historical evolution of Germany’s European vocation.

In the beginning was Stunde Null, the unconditional surrender of National Socialist Germany to the allied powers in the course of April to May 1945. Four years later, on May 8 1949,  the West German constitutional convention approved a Basic Law, establishing the Federal Republic.

The Basic Law lists the inalienable and fundamental rights of all citizens, endorses the separation of powers, confirms the rule of law, a free press, and regular elections, establishes rules to ensure a stable governing majority, and crowns the whole with a powerful Constitutional Court to ensure that the rules of the Rechtstaat be rigorously adhered to.  The Basic Law also pledged the legislature to establish a federal central bank- a commitment that was realized in July 1957, merging the regional (Länder) central banks into the authority of the Bundesbank, now responsible for the issue of bank notes and the stability of the currency. The Federal Constitutional Court (FCC) and the Federal Bank (the Bundesbank) are the two central institutions of the Federal Republic that stand above politics, and set the bounds within which the public affairs of Germany are conducted. Article 23 of the basic law also commits the Federal Republic to realize a European Union, “which is committed to democratic, constitutional, social and federal principles and the principle of subsidiarity and guarantees a fundamental rights protection substantially comparable to those in the  Basic Law.” Article 24 states that the federation may transfer sovereign rights to international institutions.

Early years. 

The authors divide the history of Germany’s European vocation from 1949 to 2018 into phases: the pre-sovereignty years of 1949-55, when Chancellor Adenauer laid the foundations for the country’s western orientation (Westbindung), notably the signing of the Paris Treaty of April 1951, that laid the foundations for supranational European institutions and reconciliation with France; the years 1955 to 1969, when Chancellor Adenauer and Erhardt strove to rebuild Germany’s salonfähigkeit by embracing the Federal Republic’s incorporation into NATO, and then into the EEC; the years 1969 to 1989, when Chancellor Willy Brandt laid the foundation for a détente in better relations with the USSR, the German Democratic Republic and the other communist states of central-eastern and south-eastern Europe, and that  Chancellors Schmidt and Kohl complemented by moving with France to incorporate the developing intergovernmental structure of the European Council alongside the supranational components of European policy; the years 1989-92, culminating in German unification, described by the eminent German political analyst, Karl Kaiser, as “one of the greatest triumphs of leadership and diplomatic professionalism” in modern history.

German unification transformed Germany, and it transformed the EU. In terms of public opinion, it incorporated 16 million people into Germany who were unfamiliar with the whole process of European integration. With German unity achieved, identification with the German nation increased, as the authors’ note, and identification with the EU stagnated or became subject to wide swings in sentiment. Incorporating the new Bundesländer also altered the balance of party politics, and transformed German public policy priorities, notably in agriculture, and state aid. At the same time, West German and EC rules were transplanted wholesale into the new Bundesländer, along with commitments at the Strasbourg European Council meeting in December 1989, and at  the Dublin European Council in April 1990 to hold intergovernmental conferences on economic and monetary union, and on political union. Germany unity accelerated the EC’s development from community to union.

From German unity to German hegemony?

The years 1992 to 2018 saw a fundamental change in Germany’s relations with Europe. For over two decades, West German taxpayers transferred 6% of gdp in subsidies to the new Länder; the new citizens of the Federal Republic had not been inducted into support for the country’s western orientation; their industries were essentially closed down by West German corporations working through the Treuhandanstalt; and their large scale farms diluted the small farm coalition of western Germany that had underpinned support for the Common Agricultural Policy. Nonetheless, Chancellor Kohl continued with the inherited pro-integration policies of his predecessors, imposed a Bundesbank design on monetary union, and successfully pushed a German agenda for a Common Foreign and Security Policy, while incorporating home and justice affairs into the broad scope of European affairs.

A major change came with the SPD-Green coalition governments of 1998 to 2005, when Chancellor Schröder, in the words of the authors, proved more prepared to frame his policy around national interests.  This, in my view, is a mild way of stating the change: in 2002, Schröder decided that Germany would in no circumstances back the United States and the western allies on Iraq (the former Chancellor Kohl pointed out that all that the western allies were doing is to ask support to bring an international criminal, Saddam Hussein, to justice). This was the first time since 1945 that Berlin had said Nein to Washington DC. Schröder followed that up by flouting the rules drawn up by his predecessors under the Stability and Growth Pact, to maintain budgetary discipline within the Eurozone; he then introduced the so-called Hartz reforms, to make the labour market more flexible; to use wage negotiations procedures to keep wages down and productivity levels rising; and to promote savings over consumption. The result was a massive surge in the German trade surplus to levels of 8-9% gdp by the time of the 2008 world financial crash. In office, and even more so out of office, he championed Russia as the prime energy supplier to Germany. The authors do not mention that this pro-Russian energy policy did not go unnoticed in Paris. It was compounded by Chancellor Merkel’s abrupt decision of 2011 to ditch nuclear energy, the main supplier of which could have been France.

The other plank of the SPD-Green coalition was to champion the European Constitutional treaty, drawn up under the direction of former French President, Giscard d’Estaing.  The key clause in the Treaty was Article I-6, which stated that“The Constitution and law adopted by the institutions of the Union in exercising competences conferred on it shall have primacy over the law of the Member States”. The supranational authority to ensure that the Constitution prevailed was to be the European Court of Justice. But the Constitution was rejected in successive referenda in France, the Netherlands and Ireland. As the authors point out, Chancellor Merkel salvaged the Treaty, which was rejigged in the shape of the Lisbon Treaty. As Giscard d’Estaing told the European Parliament, Lisbon was in effect the same as the Constitutional Treaty, but repackaged and made more opaque. This key supremacy clause duly found its way into an annex of the Lisbon Treaty.

The legal opinion of 22 June 2007 on which this annex to the Lisbon Treaty is based, declares: “It results from the case-law of the Court of Justice that primacy of EU law is a cornerstone principle of Union law. According to the Court, this principle is inherent to the specific nature of the European Community. At the time of the first judgment of this established case law (Costa/ENEL,15 July 1964, Case 6/641) there was no mention of primacy in the treaty (my italics). It is still the case today. The fact that the principle of primacy will not be included in the future treaty shall not in any way change the existence of the principle and the existing case-law of the Court of Justice.” [1]

In other words, the Court claims supremacy, but that supremacy is not recognized in any Treaty form. It has been claimed by judicial activism, and acquiesced in by member states, as a provisional convenience.

European integration and/or ordoliberalism.

As the authors explain, two overarching ideas have guided German policy on European integration: one is a widely shared preference among German élites for a federal European structure, similar to Germany’s own domestic experience; the other is “ordoliberalism”, where the ordo refers to the need for the state to create an order, rather than to leave markets to their own devices. Ordoliberalism informs the set of principles that underpin the social market economy- competition, property rights, open markets and one may add the re-distribution of income within the federation. The principles take institutional shape in the form of the FCC, the Bundesbank, the Cartel Office to counter monopolistic tendencies, or the Council of Economic Advisers which pronounces regularly on economic policy and performance. In turn, these institutions, created under the Federal Republic are underpinned by local banks, business associations, trade unions, and the training and  welfare provisions inherited from the Bismarck era.

Success over the decades has entrenched a widespread consensus in support of this social market economy, which the authors pithily define  as a marriage of ordoliberalism ideas and Bismarckian policy. Since the foundation years of the EEC, German policy has been to export them into the fabric of European integration, itself seen as the antidote to nationalism. Where the Federal Republic did develop a national identity prior to unification in the years 1989-92, it was in antithesis to the National Socialist past, and to the communist present in the GDR.They quote Paul Lever, the former British ambassador to Germany, as saying that “the European Union is to some degree Germany’s state religion”.  See my review of Lever’s book,: https://storybookreview.wordpress.com/2017/12/30/berlin-rules-why-what-how-and-is-that-so.

 Germany in a changing world.

Over the two decades between German unification and the world financial crash of September 2008, some of the factors making for a happy balance between Germany’s national, European and global  vocations became less favourable. Public concern about the cost of unification fed into a tightening of domestic rules regarding budget profligacy; with unification, public support for “more Europe”-Kohl’s preference-cooled; France failed to implement the extensive domestic policy reforms required to bring its political economy into line with the exigencies of monetary union; the expansion of EU membership, first to the Nordic states and Austria, and then to the former communist party-states of central and south-eastern Europe, complicated the task of broader EU governance; Germany’s geographic advantage at the heart of the wider European economy helped to widen the gap with France, and increased the number of its preferred partners in Europe; globalisation expanded the number of extra-European growth markets for German corporations, helped to foster the rise of China, and informed President Obama’s efforts to pivot the focus of US foreign policy concerns to the Pacific. By the time that the Greek debt crisis broke in May 2010, the world was becoming a very different place from what it had been at the time of German unification.

As the authors write, developments in the European Union in 2010 propelled Germany into an unaccustomed central role in European affairs.  Ordoliberal ideas on balanced budgets, now written into law in Germany, were no longer so readily compatible with Germany’s enduring commitment to European union. The contradictions had been latent for some time, I would argue from the late 1960s on. They became more evident during the negotiations for the Maastricht Treaty, and proved impossible to conceal as of May 2010. The book focuses on the years since, when European policy has been hit by one crisis after another: the Eurozone crisis; the decline in the importance of the relationship with France; the backlash from southern Europe to the Eurozone austerity policies largely shaped by the Berlin government’s preferences; the Ukraine crisis of 2014, and Russia’s military seizure of the Crimea; the Greek crisis of the first half of 2015, followed by the refugee crisis of the second half; the split between western and eastern European member states over how to deal with the immigration crisis; the Brexit vote of April 2016, followed by the Trump victory in the presidential elections of November. Inevitably, the strains showed up in a notable politicization of Germany’s European policy, evidenced by the rise of parties on the far left, Die Linke, and on the far right, the AfD.  The authors rightly argue that the turning point in Germany’s European diplomacy came with the Eurozone crisis, and was deepened by what the authors describe as the decisive unbalancing of the Franco-German relationship. Their interpretation is that leadership was thrust on Germany by events: it is a “reluctant hegemon”.

Hegemony and domestic politics. 

The authors’ starting point is that Germany is in a situation of political and economic interdependence in Europe and the world. Its national interests in these domains are shaped by domestic politics mediated through  its institutions and coloured by  German history. In this, Germany is no different to other EU member states. Where it does differ is that it has become dominant in a way that is not readily compatible with the original inspiration of European integration, which was to prevent the hegemony of any one or group of member states. To those familiar with the discussions about international politics, supranational integration is conceived as the anti-thesis to balance of power politics.

The authors deploy two concepts as an organizing device for their discussion. The first is the concept of hegemony, which they use as a hook to explain the international aspects of Germany’s role in the EU. The second is domestic politics, conceived as expressed by political parties,  interest groups, and Germany’s  élites through its institutions.

They present three sets of ideas about hegemony: the lead states’ provision of collective goods for the system; the reigning set of ideas; and the key ingredient of consent by followers, both domestic to Germany and in the rest of Europe.

Provision of collective goods.

The source of their discussion on the provision of collective goods is Charles P; Kindleberger, in his book, The World in Depression: 1929-1939, University of California Press, 1973. The famous MIT economist and historian studied financial crashes, and the phenomenon of panics and manias. He argued  that market participants could panic for a multiplicity of reasons, and that leadership played a fundamental role in the way that financial crises played out. As he wrote in the introduction to his 1978 book Manias, Panics, and Crashes: A History of Financial Crises, New York: Basic Books (revised and enlarged, 1989, 3rd ed. 1996): “In […] The World in Depression, 1929-1939,I reached the conclusion that the 1929 depression was so wide, so deep and so prolonged because there was no international lender of last resort. Exhausted by the war and groggy from the aborted recovery of the 1920s, Great Britain was unable to act in that capacity and the United States was unwilling to do so”.

The thesis generated a spate of studies on what came to be known as “hegemonic stability theory”  (HST). As Kindleberger wrote, “political scientists interpreted […] economic leadership in a wider sense of hegemony, extending it from the economic to the political, military and cultural areas […] dominance and hegemony do not appeal to me as rhetoric, implying, as they do, the use of force rather than example, persuasion, even subsidies.” [2]  Kindleberger was essentially interested in the economic functions discharged by hegemonic powers. They were always self-interested: the key question is whether they were benevolent. To be so, they would have to fulfil five functions: maintain a relatively open market for distress goods; provid countercyclical, or at least stable, long term lending; police a relatively stable system of exchange rates; ensure the coordination of macroeconomic policies; act as a lender of last resort by discounting or otherwise providing liquidity in financial crisis.

Significant costs, writes Kindelberger, are associated with acting as a benevolent hegemon: “a leading country typically pays more than its proportionate share of a joint venture like a war fought for allies, or a program of foreign aid […] the need to over-provide arises from the presence of ‘free riders’, who share in the consumption of public goods, including peace, freedom from aggression, economic stability and the like, but hold back from contributing to their costs”. [3] So a central question is: why should a potential hegemon take on such costs? The costs are readily measurable; they impact segments of the hegemon’s home society differentially; over time, they structure prevailing policy attitudes among the beneficiaries. In return, the hegemon’s élites are rewarded in the coin of financial wealth and prestige.

So the key questions relating to our author’s analysis of Germany as a reluctant hegemon may be phrased in terms of the adjective and the noun: why the reluctance? Has Berlin provided such collective goods to the EU, as prescribed by HST, notably the five functions?  Is such a situation permitted by EU governance, designed to avoid, as the authors point out, the recurrence of dominant German role in Europe?

The role of reigning ideas in policy.

The definition provided by the authors on the role of ideas is derived from the Italian communist writer, Antonio Gramsci: the authors state that they are not using the idea in terms of class analysis, but more broadly as prevailing ideas and the material forces that generate them. The ideas they present in the course of the book are those that inform the foundation of the Federal Republic, as distinct from National Socialism or Communism; the prominence of ordoliberalism, and their embodiment in institutions such as the Bundesbank, the Council of Economic Advisers or the competition authorities; the distribution and separation of powers within the federation; or the battle of policy ideas as fought out between political parties, or the values and institutions which inform Germany’s political economy. .

Gramsci is well known for his ideas on cultural  hegemony, which he understood as the intellectual and moral leadership offered by a dominant group or social class. As the authors point out, a focus on ideas allows to highlight “both the clash of ideas within Germany, as well as the influence of German ideas in the EU”. Though the authors do not expand on Gramsci’s ideas, I will make a small excursion just to highlight two dimensions of his ideas: one is that the dominant élites can rule by consent rather than by coercion to the extent that their values and norms become shared as “common sense” by the people. The other is Gramsci’s emphasis on the strategems that élites can use to perpetuate their order. A modern version of this thesis would be Eric Nordlinger’s , On  the Autonomy of the Democratic State, Cambridge, Harvard University Press, 1981, where Nordlinger lists the stratagems available to public officials as ranging from coercion, and suasion,  to acceptance of demands coming up through the political system, or fundamental agreement between élites and followers. In other words, ruling élites have a battery of tools to stay in the driving seat.

Two questions flow from this perspective of consent: what is the reigning “common sense” in Germany; and what are the strategems that Germany does or may apply to promote its ideas in the EU?

Consent and hegemony.

The authors enlist Robert Keohane’s 1984 book, After Hegemony: Cooperation and Discord in the World Political Economy, Princeton University Press, as witness to the vital point that consent of the governed is needed to sustain hegemony. They quote Keohane as writing: “The hegemon plays a distinctive role, providing its partners with leadership in return for deference”. By substituting the word “deference” for “legitimacy”, they make the point that “If Germany is to be a hegemonic player assuring stability in the eurozone, or more broadly, the EU, this status will  need to have legitimacy”.

I would like for the sake of this review to add two points. The first is that Keohane writes further  (p.46) that , unlike an imperial power, a hegemon “cannot make and enforce rules without a certain degree of consent from other sovereign states. As the interwar experience illustrates, material predominance alone does not guarantee either stability or effective leadership. Indeed, the hegemon may have to invest resources in institutions in order to ensure that its preferred rules will guide the behavior of other countries”.

The second point is that Keohane’s colleague, Joseph  Nye  produced, two books contesting the thesis of US decline. The first, Bound to Lead: The Changing Nature of American Power,  came out in 1991 as a counter to the declinist literature of such writers as Paul Kennedy, in The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000, published in 1987. His second book , Is The American Century Over? gave the answer: No, not yet, and by a wide margin. “The United States remains the largest and richest power (in the world) with the greatest capacity to shape the  future.” See:https://storybookreview.wordpress.com/2018/03/11/america-and-the-world-part-ii-american-century-or-asian-century/

In our context of Germany in the EU, we can say that Germany remains the largest, though not the richest power in the EU on a per capita income basis. But does it have the “greatest capacity” to shape  the  EU’s future, either  alone, bilaterally or multaterally, inside or out of the EU?

These, then, are the three concepts -the provision of collective goods, the role of ideas, and consent- that our authors’ introduce to discuss German hegemony in the EU. The concepts of consent and legitimacy are their bridge into discussing German domestic politics. As they write, Berlin’s EU policy has to be legitimized at home, and because the country is enmeshed in  every conceivable  nook and cranny of the EU, “it is the admixture of Germany’s leading role in the EU and the increased politicization domestically that is captured in the term “reluctant hegemon”.

Chapters 2, 3 and 4  present the sources of Germany’s European power; the key national institutions;   and political parties, and interest groups relevant to German policy in the EU.  These chapters should be read with great care; they are the most succinct and complete that I know of on the subject.

Over time, the EU became part supranational, part intergovernmental. Germany became adept at securing key positions in the Commission, and has the largest national contingent of MEPs in the European Parliament. In the European Council, Germany is first among equals. But as the authors indicate, there is a difference between being first among twelve at the time of the Maastricht Treaty’s signing in February 1992, and being first among 28 in 2018. EU policy has nonetheless broadly developed in a way that reflects German interests. Germany is the single largest economy, enjoys high savings rates, a large trade surplus, balanced budgets, accumulating foreign corporate assets, and its corporations benefit by an undervalued currency. Economic and political interests are aggregated and processed through well the well functioning institutions of the federal government, the Bundestag, the Bundesrat, the Constitutional Court and Bundesbank. The authors present the political parties, the major interest groups, the subtle shifts in public opinion, and the politicization of European policy, especially over the past decade.

One clear message emerges from these excellent chapters: as the EU gained powers, so the office of the Chancellor became more prominent in EU matters; the powers of parliament were strengthened; the Constitutional Court developed its challenge to the European Court of Justice’ claims to supremacy; and German public opinion became more assertive, both in the post-2010 economic crisis in the EU, and in foreign and security policies.

German policy in Europe.

Chapters 5 covers  the broad canvas of German European policy; Chapter 6 focusses on the Eurozone crisis; Chapter 7 on foreign and security policy, and the coinclusion draws the threads together.  These, too, are indispensable reading.

The key, as the authors write, is that the EU is considered strategically important for upholding the peace and democratic principles in Europe, and projecting them onto the global stage. The picture that emerges of the country’s engagement is variegated: Germany has been the main beneficiary of the internal market; as the EU’s Europayer, Germany has mirrored its domestic tightening of budgetary policy, by more stringency for the EU budget; EU loans now come with conditions attached, curtesy of, among others, Berlin; on farm policy, some parts of the government apparatus want more funds, others less. The authors conclude that in all these areas Germany’s institutional pluralism and sectional interests have obstructed its playing the role of hegemon. As the authors point out, from 1949, until the signing of the Lisbon Treaty in December 2007, Germany led the EEC/EU in tandem with France, and supported the transferal of powers to EU institutions, hardly the stance of an ambitious hegemon.The one area where these strictures do not pertain is money.

Germany, the author writes, has been willing to cede sovereign powers to the EU, but only in case European rules and institutions emulate the German model. They rightly point out that France set the ball rolling, but that European Monetary Union is essentially German in design, as is the Stability and Growth Pact of 1997. In the response to the 2010 Euro crisis, and subsequent developments -the tightening of EU fiscal rules, the Finance Ministry’s resistance to a full banking union-the authors do not mince their words. “Germany, they write, is pursing a beggar-they-neighbour approach”(p.196).

In their conclusion to Chapter 6, they write that “itis clear that German economic strength, its export orientation and performance and its labour market institutions placed it in a strong position compared to some other eurozone states, notably in southern Europe. Less competitive states were unable to pull the traditional policy lever to bring about adjustment, namely devaluation. Unlike Germany, these states lacked agenda-setting power because of an absence of market credibility. Moreover, given that Germany was opposed to a ‘transfer union’ the traditional policy instruments for managing such situations within a state were also excluded,…While the debtor countries had over-borrowed, the exposure of French and German banks was intrinsic to the crisis… the majority of the funding from the first two eurozone rescues in effect went to the banks as lenders rather than to the Greek state. These underlying circumstances did not amount to hegemony as such but they endowed Germany with significant structural power even before consideration of the diplomatic dimension is considered.”

German, and one should add, Dutch and Finnish public opinions, refused to budge. The travails of France and the Mediterranean states had nothing to do with Germany’s massive trade surplus, and Germany’s insistence on fiscal retrenchment, -their arguments ran- and had everything to do with Latin (and Greek) fiscal profligacy. More to the point, our authors point out that Germany’s publicly approved sound money principles, derived from ordoliberal ideas, clashed with Germany’s pro-integration discourse. With northern allies of Germany calling for leadership, and southern states criticizing German hegemony, the legitimacy of German’s lead position in the EU  became both problematic and divisive. They do not spare Chancellor Merkel. “The complete lack of any accompanying pro-European vision from the German government amidst the eurozone crisis made clearer thanever before how its diplomacy has been determined by national interests… The entrenchment of sound money principles and ordoliberalism in Germany; attentiveness to public opinion; the interventions of the Bundesbank; and a weak sense of vision on the part of ChancellorMerkel built into an irresistible force behind the persistence of, and insistence on, austerity policies in the eurozone. Politicisation within Germany, far from being a constraint on Berlin’s European policy, served to strengthen the hegemony of German ideas.” (p200).

Is Germany hegemonial in foreign and security policy? The authors dispute the case.  The nub of the argument of Germany as a geoeconomic power is centred on German-Russian relations. The relationship is backed by big business, by guilt from the second world war, by the SPD and its investment since 1970 in relations with Moscow, by public opinion, and a sense of ideological equidistance between the United states and Russia. But Russia, they point out, is Germany’s eleventh export market in size; Merkel imposed sanctions hurtful to German interests when Russia invaded the Ukraine in 2014; and in any case Germany has no sustainable security concept in a fast changing world. It remains a security importer via NATO.

Overall, the conclusion is that Germany has not become the EU’s hegemon. It did assert its structural power in the eurozone crisis , and export its ordoliberal ideas into the EU with the Fiscal Compact of 2013. When  Merkel opened Germany’s doors unilaterally to refugees in August 2015, she faced rejection by the countries of Central Eastern Europe, and punctured the Schengen agreements commitment to free movement of people. On the Ukraine, no major split has emerged between member states. The prime risk to the EU, they conclude, comes if the EU cannot act effectively because of divisions between member states.

 

1. “La C.E.D. est rejetée: une vibrante Marseillaise a salué le résultat du scrutin”,  L’Humanité, 30.08.1954.

[2]De iure belli ac pacis, Book I.Chapter 3.Section 7.paragraph1.

[3]Quoted in Miller’s “Hugo Grotius” entry in the Stanford Encyclopedia of Philosophy: according to Miller, “Grotius was upset when the powerful French Cardinal Richelieu told him” this principle (6-7).

 

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) (www.chinauncovered.net) 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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