The German left’s defence of Europe

While Angela Merkel opts for a narrow definition of the German interest, the opposition champions a return to European collectivism based on leftist values
Dionyssis G. Dimitrakopoulos
12 January 2011

Much of recent public commentary on the crisis in the eurozone has dealt with Germany and “the Germans” as a monolithic and internally undifferentiated entity. This is an important matter because part of Angela Merkel’s opposition to alternative ideas has been couched in the notion that they would not be supported by the Bundestag. But treating Germany and the Germans – especially their political elite – as a monolithic entity is inaccurate and unhelpful. It is inaccurate because what the German government should do is, in fact, contested within Germany.

Indeed, there is a coherent critique and a set of proposals articulated by the SPD, the Greens and – despite its past differences on European policy  - Die Linke, i.e. the German centre-left and left parties, while senior current and past officeholders from the ranks of Angela Merkel’s own party have also voiced their dissent. These are much more in tune with the policies of successive post-war German governments than with the policy pursued by the current coalition government of the Christian Democrats and Free Democrats. Finally, the caricature of an undifferentiated German political class is also unhelpful both because (a) it prevents reformists in other parts of Europe from seeking allies within Germany and – as a consequence – from devising a credible alternative platform, and (b) it ignores a new reality: the debate is no longer purely about having more or less ‘Europe’ (i.e. integration); rather, it explicitly relates to values that distinguish the Left from the Right and thus no longer deprives citizens from the primary lenses through which they understand political reality.

The critique articulated by the German opposition parties has three facets. First, they denounce the current German government for moving away from the post-war consensus which entailed the definition of German interests as part of (rather than in opposition to) Europe’s collective interests. Second, they rightly accuse the current German government of populism and of failing to play the role that only Germany – given its economic might – can play in the development of the European Union. These two points were encapsulated in Gesine Lötzsch’s call to Angela Merkel: “Bringen Sie unser Land nicht weiter in Verruf!” (stop bringing our country into disrepute). Finally, they criticise the current government’s policy for failing to address directly the causes of the eurozone’s crisis.

As a result, the SPD, the Greens and Die Linke explicitly and robustly support the development of a real economic and political union, including the genuine co-ordination of economic policy, the harmonization of social and tax policy, and the comprehensive regulation of financial markets. In other words, in addition to criticising Angela Merkel’s stance for not being pro-European, their proposals reflect their location on the Left-Right axis and the (more or less) explicit acknowledgment of the failure of the neoliberal paradigm. For the German social democrats in particular this marks a return to their roots: they had called for the establishment of the United States of Europe as early as 1925, and Kurt Schumacher, their first leader after World War II had criticised the early stages of European integration not in principle but because the initial form it took was konservativ, klerikal und kapitalistisch.

While leading German social democrats (both veterans such as Helmut Schmidt and representatives of a younger generation like Sigmar Gabriel and Frank-Walter Steinmeier) and Greens (like Jürgen Trittin) had already publicly denounced the stance of the current German government, the debate in the Bundestag of 15 December 2010 ahead of the meeting of the European Council in Brussels offered ample evidence of remarkable common ground between the three left of centre German parties. As the complementarity (even homogeneity) of the speeches of parliamentary party leaders of the SPD (Frank-Walter Steinmeier), the Greens (Jürgen Trittin) and Die Linke (Gesine Lötzsch) demonstrates, these parties speak from the same hymn sheet in terms of both their critique of the CDU/CSU-FDP coalition government’s European policy (and the current EMU arrangements) and their proposals for the future of the eurozone. In other words, Germany’s Euro(pean) policy is essentially contested - predominantly along the Left-Right axis – thus mirroring debates amongst German economists. The crisis and the response to it are, ultimately, a matter of values that distinguish the Left from the Right. So, what does the opposition propose?

First, rather than opt for a piecemeal and therefore unconvincing approach, the response to the crisis must be robust and comprehensive. Second, the background to the crisis is rooted in excessive public spending only in the case of Greece. As experts acknowledge, this is not the case in Spain or Ireland where private debt rose dramatically. Since the banks are to blame for lending irresponsibly, their regulation is a conditio sine qua non for real reform. This particularly concerns the German banks, which according to calculations of the IMF (pdf), are the largest lenders to Irish banks (to the tune of €113 billion). This – as the German opposition politicians rightly claimed in the debate in the Bundestag - is also one reason why the current German government agreed to the Irish (and the Greek) bailout. According to them, the German government should instead promote the establishment of a European framework for bankruptcies of financial institutions (as well as a financial transaction tax).

Third, the Euro is worth saving not only because – ultimately – it is part of a worthy political project but also because it has served German interests very well. Countries such as Greece, Ireland and Spain that gained access to cheap money as a consequence of their accession to the eurozone used this credit to buy German products, thus boosting the German economy. Jürgen Trittin argued that in 2007 2 percent of Germany’s entire GDP and 25% of the German export surplus was generated by demand in Greece, Portugal, Spain, Italy and Ireland.

Support for the struggling eurozone economies must be offered in terms that allow them to grow. This cannot happen as long as (a) the interest rates they pay in the open market and the bail-out mechanism are onerous and (b) the overall volume of their debt is at its current levels. So, as the SPD’s Frank-Walter Steinmeier and Peer Steinbrück argued in their article in the Financial Times on 15 December 2010, an ‘intelligent haircut’ is needed for current bondholders since Greece, Ireland and Portugal otherwise cannot – as things stand – return to sustainable growth (and, consequently, repay their debts which is what some economists already claim with regards to Greece). This must happen before the ECB buys more of these bonds.

In addition, a clear sign of solidarity - in the form of the extension of the current safety net - is needed before the crisis spreads to other eurozone members. This extension must be large enough to simultaneously guarantee the entire outstanding debt of all stable eurozone countries.

Fourth, in the medium term the introduction of eurobonds (covering only part of public debt so as to avoid the problem of moral hazard) would send a clear signal of the irreversibility of economic and monetary union. As Jürgen Trittin argued, instead of giving in to the populist calls of the popular tabloid Bild, the German government should inform German public opinion that eurobonds are not new but already exist (in all but the name) in the form of the European Financial Stability Facility which involves borrowing from the open markets with guarantees from solvent states – such as Germany – who enjoy low interest rates. This advantage is then passed on to countries (like Ireland) that cannot do so.

Finally, the introduction of eurobonds – an idea that finds support even amongst some of the CDU’s senior politicians - should go hand in hand with the empowerment of institutions to establish tighter controls over fiscal and economic stability, alongside common minimum standards on wage and welfare policies, as well as capital and corporate taxation. This package would put an end to beggar-thy-neighbour policies and harmful tax competition (relentlessly practiced by countries such as Ireland, as several German opposition leaders rightly point out) amongst members of the eurozone and deal with the EMU’s birth defects.

It would be simplistic to depict these proposals as merely pro-European (or indeed, as a reflection of complete agreement between these parties on domestic matters). However, drawing on internationalism, solidarity, the need to re-assert the pre-eminence of politics over markets (i.e. core common principles of Europe’s Left) and a hard-headed, explicit acknowledgment that being pro-European is also in Germany’s interests, the SPD, the Greens and Die Linke demonstrate that after the doom and gloom that followed the Left’s defeat in the European elections of 2009 and the German elections of the same year, there is an alternative.

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