Germany decides

This article was published in The Malta Independent on Sunday - 22 09 2013

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In today’s German elections the electorate is not simply deciding who will occupy the Chancellery for the next term and the shape of the coalition that will form Germany’s next government.   They are by and large deciding the future of the EU and the Euro.

Germany is a big part of the solution to the Euro problem.   Failure to acknowledge this renders resolution of the problem far more challenging and complex.

This was nowhere more evident than in an opinion piece written this week by German Finance Minister Wolfgang Schauble, a prominent member of Chancellor Merkel’s CDU.   Under the title “Ignore the doom-mongers- Europe is being fixed” published in the Financial Times ( Sept 17^th) Mr Schauble argues that the German austerity recipe is the right cure for Europe’s problems, that progress is already evident and as fiscal discipline turned Germany from the sick man of Europe in 2003 to the economic power house it is today, so the periphery countries under distress have to stay the course till redemption comes.

“Structural reforms take time. Those responsible for them need patience and an aptitude to ignore the siren call of quick fixers and the protestations of special interests.  Signs of improvement are no reason to backtrack – they are reason to persevere…… We should fight the human tendency to extrapolate the present forever into the future. Systems adapt, downturns bottom out, trends turn. In other words, what is broken can be repaired Europe today is the proof”

Politicians must think positively. When facing a weekend election politicians must be doubly positive. So while there is truth in Wolfgang Schäuble’s assertion it does not go far enough.

What matters is not whether Europe is being fixed. Time will fix anything if you can afford it. The question is whether the speed at which Europe is being fixed is something that countries in distress can bear for long enough to stay the course, or whether democratic systems under stress in deficit countries will abort the process before completion. Under extreme pain of austerity without growth, electorates may turn to extreme populists that offer easy solutions. This almost happened in Italy just last February.

The comparison that the German minister makes between Europe and his own country’s experience since 2003 is comparing apples with pears.  Germany was endowed with the strong legacy of an export-oriented industrial base, which could produce exports as the country regained competitiveness through socially-fair burden-sharing adjustment. It had the benefit of strong demand from the current crisis-stricken EU countries as it turned a self-serving blind eye to their breaking of the single currency monetary rules. On the contrary, the crisis-stricken EU countries are today facing a global recession in which even countries that, like Germany, can afford to loosen up to stimulate consumption, insist on the false virtues of balanced budgets.

Next week, Mr Schäuble may have to work harder to match his pre-election positive outbursts. With the next elections far over the horizon he may finally accept that surplus countries have to do their part to restore internal equilibrium within the EU and in a timely manner that protects the solidarity that Europe stands for.

Yet next week Mr  Schäuble may no longer be in charge of Germany’s finance ministry if the polls indicating the need for a grand coalition between the CDU/CSU and the SPD are proven right.    In such a scenario it is probable that Peer Steinbrueck  SPD probably unsuccessful challenger to Mrs Merkel,  will be restored to his post as Minister of Finance, a post he held quite successfully in the last grand coalition.

Such a scenario opens the way for Germany to adopt a much more pragmatic view to resolving Europe’s economic distress and instability of the Euro monetary system. In her last term as Chancellor Merkel would not want to leave a legacy of breaking the Euro.   She wants to be remembered as the saviour of the Euro, a monetary system that has brought so much benefit to Germany’s economy helping it to remain rock solid whilst all around it were floundering. Steinbrueck as finance minister will implement his Marshall Plan approach towards the restructuring of the economy of countries in distress and will abandon the Versailles approach insisted upon under Schauble’s guardianship.

In the last weeks of the electoral campaign I perceived a stance on the part of Mrs Merkel where she sent discrete signals to push the last coalition partners FDP below the 5% threshold.  This would deny them parliamentary representation, and leave the grand coalition as the inevitable solution for a stable government.  This will strengthen Merkel’s hand to overcome internal resistance towards a more benign approach towards the Euro problem.   It would also help to bridge the conceptual differences between Germany and France and augur well for a rapprochement of the twin motor that is necessary to drive European integration forward to the next level.

For all their economic strength Germany remains shy of their economic power and as always need  France by its side to give it political cover for the institutional changes that would be necessary to deliver an ever closer Europe.

A new chapter for Europe and the Euro begins tomorrow.

Yesterday’s 49^th independence celebration also opens the way to some political maturity that Malta needs to reach in preparation for the 50^th anniversary next year.   In a conference held in 1989 on the 25^th anniversary I had concluded my speech as follows:

“In my opinion just as a young man celebrates his birthday whatever the circumstances of his birth, so Malta should celebrate the anniversary of its political birth and keep open if you will at the political level the argument whether we should eulogise or otherwise those who with an eye on  perception rather than reality,  ruled over our political birth among thorns when with more propriety, wisdom and affection could have had our birth at least on straw if not on cotton wool.”

By the time we come to celebrate the second 25 years of our nationhood may be we would have moved close enough to political maturity to choose Independence Day as our one and only national day, keeping other days as state holidays to commemorate the respective events. We may learn to appreciate that in celebrating Independence we are not strictly celebrating the event.  We celebrate the journey leading to it and the key political developments that followed it.