Published in Business Spectator (Melbourne), 31 May 2012
Analysing the link between the Holocaust and the European crisis is far more interesting than solving the crisis. At least if you are German. While the rest of the continent is tumbling towards the monetary abyss, it seems the Germans would rather conduct another debate about their historical guilt.
It is all Thilo Sarrazin’s fault – again. The ex-Bundesbank director and former state treasurer, who provoked outrage two years ago with his views on migration and multiculturalism, just published another tome. Its title: ‘Europe does not need the Euro’.
Expectations were great, with the book topping the German Amazon’s bestseller lists weeks before it was published and 350,000 copies ready for a scandal hungry readership. But whoever expected a Eurosceptic diatribe is in for disappointment. Sarrazin delivers a dry economic treatise, which shies away from calling for radical solutions such as an abandonment of monetary union.
However, Sarrazin is such a polarising figure in public discourse that a single sentence out of 464 pages was enough for his opponents to condemn the book and its author. It is from a passage in which he mocks German supporters of euro bonds as “driven by that very German reflex that we can only finally atone for the Holocaust and World War II when we have put all our interests and money into European hands.”
Politicians of all parties, including finance minister Wolfgang Schäuble, expressed their disgust with the idea that Germany’s stance towards the euro had anything to do with the country’s shameful past. Sarrazin, so they claimed, was abusing the Holocaust to justify his Eurosceptic positions – or even worse, to sell more copies of his book. No right-minded person should still be seen debating with Sarrazin, a Social Democrat backbencher opined in a tabloid newspaper.
Perhaps the outrage was only that pronounced because Sarrazin twisted the knife in a very German wound. Polemical exaggeration aside, what he says is a rather accurate summary of Germany’s post-War policy towards Europe. The lesson learnt from Germany’s historical sins had always been to anchor Germany firmly in Europe. From Konrad Adenauer to Angela Merkel, German chancellors had this raison d’État internalised. In order not to rouse suspicion, they were happy to divest themselves of money and power for the benefit of European peace and unity.
In his clear-eyed way, Sarrazin pointed out that in order to deal with monetary policy such reasoning is fallacious. Yes, Germany carries a terrible historical guilt from the National Socialist genocide, he says. But can this ever be a sufficient reason for Germany to shoulder the public debt of its European neighbours? Sarrazin’s answer is a clear ‘Nein’. History should not be an argument for bad economic policies. Instead he recommends a return to Bundesbank-style monetary orthodoxy and the enforcement of European treaty law, beginning with the Maastricht Treaty’s famous ‘no bailout’ clause.
The discussion Sarrazin has triggered in Germany shows that the country is torn between two irreconcilable positions. On the one hand, there is the old post-War paradigm that for political and historical reasons, Germany cannot afford to assert its own positions too loudly. This is exemplified in Chancellor Merkel’s dictum that Europe would fail if the euro failed. On the other hand, there is growing unease about accepting ever growing responsibilities and liabilities for other countries, as evidenced, for example, by the success of Sarrazin’s book. Opinion polls show Germany is almost equally divided on this question.
Perhaps it takes some distance from Germany to see where this is heading. Last week, at an event hosted by The New Zealand Initiative in Auckland, British European Parliament member Daniel Hannan argued that the Germans would eventually realise that historic guilt could no longer guide their euro policies. In the end, Hannan predicted, other European countries with no guilt complex – such as the Netherlands, Finland and Luxembourg – would cease to support ever-growing commitments to euro rescue activities. This would leave Germany virtually isolated in its support for a combination of austerity policies and transfer union.
At that stage, the game would be up, Hannan said. It was simply inconceivable that the Germans would continue bailing out Europe on their own. Apart from that, he was convinced that to a younger German generation, war guilt was no longer a convincing argument for propping up Greece, Ireland or Portugal. “The whole idea that the day Germany stops supporting these countries it will once again invade Poland is nonsense”, Hannan ridiculed Germany’s guilt-driven policymaking.
Perhaps the trigger for a change of direction in Germany’s policy towards Europe will be much more mundane than historical, philosophical or political debates. In the end, it could just come down to money.
For the past three years, Germany has not fared too badly in the euro crisis. As the country in the calm eye of the euro storm, it has enjoyed a period of strong economic growth, propelled by a favourable exchange rate and ultra-low interest rates. Last week, the German Treasury could even sell 2-year bonds at zero interest.
The euro crisis has not cost Germany much. The guarantees given by Germany are enormous but so far Germany’s commitment to Europe has hardly cost the Germans any cash. Quite the reverse is true. No wonder the Germans do not yet support a radical change of direction in their dealings with Europe.
But what would happen if any of Germany’s commitments towards Greece, the EFSF or the European Central Bank were triggered? A sudden outflow of billions of Euros of German taxpayers’ money would inevitably cause a rethink of the country’s traditional Europhile policies.
Daniel Hannan is right in one sense: When the euro project fails and Germany’s exposure to the continent’s debt becomes apparent, the Germans won’t suddenly return to their old habit of invading other countries. Instead, they may just rebel against their own Europhile political parties which got them into this mess.
The political backlash would certainly be uglier than a former Bundesbank director’s gentle mocking of an economically naïve political class.