44 Europe The EconomistJune 27th 2020
W
alk into any meeting in Brussels and, most likely, a German
will be leading it. In the European Commission, Ursula von
der Leyen, the former German defence minister, is in charge. For
the next six months, German ministers will be cajoling their peers
into signing off legislation as the country takes over the eu’s rotat-
ing presidency. In the European Council, where the bloc’s leaders
butt heads, it might technically be Charles Michel, the former
prime minister of Belgium, heading it. But it is Angela Merkel—
longer in post than the leaders of France, Spain, Italy and Poland
combined—who is the undisputed top dog. The eu’s main re-
sponse to the covid-19 crisis—a flagship €750bn recovery fund paid
for with debt issued collectively by the eu—is based on a plan
cooked up in Berlin and Paris. The Germans are running the show.
Usually, German power in Brussels is the political equivalent of
dark matter: invisible, difficult to measure and yet everywhere.
Now the Germans are stars, shining so bright as to be impossible to
ignore. There was no devious Teutonic plot to grab power. Mrs von
der Leyen owes her position to Emmanuel Macron, the French
president, rather than patronage from Berlin. (Mr Macron pushed
Mrs von der Leyen because he could not bear the thought of
Manfred Weber, also a German, getting the job.) It is not Mrs Mer-
kel’s fault that no French president has won a second term since
she came to power, or that most Italian prime ministers fail to
complete their first. A quirk of the calendar left Germany holding
the rotating presidency. Whether they want it or not, German
hands now grip the eu’s levers of power, just as the bloc overhauls
itself to cope with the covid-19 crisis.
Being coy on the European stage used to work well for Germany.
For obvious historical reasons, Germans do not like being seen to
throw their weight around. And the eu’s status quo suited them. A
single market let German supply chains whirr effectively and
goods flow seamlessly. The euro allowed German exports to soar
without the bother of an appreciating currency. Any downsides
were exported to southern Europe. Unemployment in Germany
stands at only 3.5%, less than half that of the euro zone as a whole
and a quarter of the Spanish figure. From a German perspective,
the euwas not broken and did not require fixing.
This happy status quo is now under threat, often from Ger-many’s own actions. When the eu’s economy lurched to a halt, the
European Commission loosened its strict rules on government
funding for stricken businesses. But officials did not expect Ger-
many to pledge €1trn for such support—nearly half of the eu’s
combined total. As a result, well-run Spanish firms are likely to go
under due to lack of state support, while stodgy German compet-
itors are kept alive by German taxpayers, undermining the “fair
fight” logic of the single market. At the same time, Germany’s con-
stitutional court recently aimed a blow at the European Central
Bank’s efforts to inject more liquidity into the euro-zone economy,
when German judges challenged the bank’s asset-buying pro-
grammes. In this sense, German support for mutualised debt
might be seen as a polite apology for causing offence.
Saying no to common debt had been a red line for the German
establishment. Now, however, a recognition that Germany needs
Europe—not just vice versa—dominates thinking in domestic pol-
itics. Arguments for the recovery fund, which will see huge in-
creases in German spending on the eu’s budget, are couched in
terms of self-interest. This marks a shift in world-view towards
that of Alexander Hamilton, the father of debt mutualisation in the
early American republic. During the euro-zone crisis, the debate
over bail-outs was steeped in the idea that diligent Germans were
bailing out feckless Greeks (rather than the feckless German and
French banks who lent them the money in the first place). In a pan-
demic-induced crisis, there is less blame to go round.
Instead, there is recognition that without some form of transfer
between Germany and her struggling neighbours in southern Eu-
rope, political misery beckons. The euis supposed to be a conver-
gence machine, spreading prosperity rather than embedding dif-
ferences between rich and poor countries. It has not worked that
way. When the euro was introduced at the start of the millennium,
Italian gdpper capita was 20% below Germany’s. Now the gap is
nearly 40%—a figure that will only widen during the crisis. Ital-
ians may question the rationale of membership if their incomes
continue to stagnate. It is for this reason that Mrs Merkel frames
the recovery fund as a “political instrument against populists”.
Keeping the euon the road takes on an existential importance
now that America, the bedrock of German prosperity in the post-
war era, has become an erratic ally. Strengthening the eu’s internal
structures, by filling the gaps in its pockmarked constitution, is
seen as the best way of protecting it from external threats. Ideas
that were once off-limits, such as the long-winded, politically dif-
ficult task of changing the eu’s treaties, are now openly floated by
Mrs Merkel. It is, at heart, a conservative radicalism. Things are al-
lowed to change, but only so that things stay the same—specifical-
ly the rich, peaceful lives of German voters.A still-reluctant hegemon
German leadership in Europe makes people uneasy, particularly
Germans. In private, Mrs Merkel used to point out that Germany
was unsuited for such a role since the country was itself a mini-eu,
its complicated federalism built on delicate compromise. Nimble
decisions were impossible in such circumstances. Anyone relying
on Germany to take bold steps would be disappointed, as many
were. If this record is to change, now is the time. An institutional
conjunction has left Germans calling the shots in Brussels. Rather
than a lame chancellor limping to the end of her 15-year career, Mrs
Merkel sits on a pile of political capital, gained from competent
handling of the pandemic. Germany has the means to change Eu-
rope—if it chooses. 7Charlemagne Doomed to lead
Germans are in charge of Europe, whether they like it or not