A NECESSARY, welcome but belated public debate is opening up in Germany about the future of the euro and that state’s role in preserving it. The discussion engages different members of the conservative coalition between the Christian Democrats, Free Democrats and the Christian Social Union, the opposition Social Democrats, Greens and Left parties as well as dividing economists, lawyers, philosophers and other intellectuals, the media and the country’s wider public opinion. Since Germany is the central player in this drama it is essential that its political leaders and voters have a clear understanding of the choices facing them ahead of federal elections in just over a year.
Should Germany become the main funder of an EU “transfer union”? Would that not make it responsible for undisciplined debtor states incapable of the structural reforms required to put their public finances in order? What conditions should attach to the partial or full mutualisation of state indebtedness in the EU? Should the European Central Bank be allowed buy bonds of euro area members under pressure like Spain, Italy – or Ireland? Should Greece be allowed leave the euro? What legal and constitutional changes need to be made in Germany if deeper EU fiscal and political union becomes necessary to save the euro?
These are among the most important issues under debate. They deeply challenge long-held and more recent assumptions built into its political, economic and legal cultures. German power and influence ensured it got its way in designing the euro and the ECB after unification in the early 1990s and then in benefiting from its initial success by huge exports of goods and capital, thereby Europeanising its domestic policies.
Responding to the euro zone crisis over the last two years found Germany framing it within these norms, especially by depicting Greece as a profligate culprit. But that stereotype also masked Germany’s own interests in protecting its banks from contagion and the European demand for its low-cost manufacturing exports.
These guiding assumptions and norms are now under question in the emerging debate, which is driven as much by external as internal pressure. Chancellor Angela Merkel’s piecemeal and pragmatic approach to the euro crisis has gone beyond such previous positions and is now informed by a more strategic vision of the need to save the euro through closer European economic and political integration.
That demands compromise at European level and domestic adaptation, as can be seen in her recent willingness to accept a more activist ECB role in Spain and Italy, so long as they accept conditional loans. This will not be enough to save the currency. But the emerging German debate on possible constitutional change at home and in the EU, together with drafting conventions and ratifying referendums, indicates a radical will to take the necessary political as well as economic action. That will is equally apparent elsewhere in the EU. It should not be underestimated in the coming decisive months for the euro.