Munich forum considers Berlin leadership role

AFTER A draw in Davos, round two of Europe’s public austerity-or-stimulus row got under way yesterday at Munich’s annual Security Conference.

Despite renewed sabre-rattling in Iran and a massacre in Egypt, the opening discussion in the Bavarian capital – about German leadership in the world – focused on competing prescriptions for the euro zone patient.

Representing the austerity school of medicine German defence minister Thomas de Maizière, a confidante of Angela Merkel, said the German leader translates calls for German “leadership” in this crisis as calls for German cash and a relaxation of her austerity and reform demands.

For Germany, he said, debt-driven stimulus cannot solve this crisis. Those calling on Europe to spend its way back to health had, he said, encouraged Europe to spend its way into illness.

“These people say, ‘of course we should observe budgetary discipline, just not now’. I think growth doesn’t just come from more money but from other ways,” said Mr de Maizière. “Without the German position of spreading a stability culture in Europe, we wouldn’t be as far as we are on competitiveness, rather we would find ourselves again in the situation in which we found ourselves at the start.”

Proving that German austerity is a broad church, fellow German panellist Frank Walter Steinmeier, the former Social Democrat foreign minister, said it was dangerous for Berlin to paint itself into an austerity corner “because of domestic political sensitivities”.

“I would ask that we leave ourselves open to instruments that we may need in the future, such as growth instruments,” he said, adding that the Merkel administration had a blinkered view of Germany’s own austerity efforts during its 2004-2005 recession. “We took a break from austerity and debt reduction to do structural reforms in the economy,” he said. “If we had done both at the same time, with the same discipline we are now demanding of others, I’m sceptical we would have managed it as successfully as we did.”

In effect, Mr Steinmeier was defending the Schröder-era breach and watering-down of the stability pact as a pragmatic act for the wider European economic good. With his SPD a likely coalition partner for Mrs Merkel after next year’s general election, interesting times loom for Europe’s new fiscal compact.

European Parliament president Martin Schulz presented Munich delegates with Germany’s leadership dilemma: “Everyone is calling for German leadership but the moment the Germans lead, people say, please not in that direction.” He said Germans were “both willing and reluctant leaders” who felt their country is measured by a different yardstick to everyone else and was thus still not a “normal” European nation.

To overcome this problem the new European Parliament president, unsurprisingly, called on Berlin to renew its wavering vows to the EU’s community method rather than pursue its path of solutions outside the existing legal and institutional framework.