It is probably just as well for Germany that their current Chancellor happens to be a rather dull middle-class woman who looks and sounds more like a housewife than a political colossus. Because if she were an alpha-male ruffian with a booming, authoritarian voice, or even a stridently feminine figure like our own Margaret Thatcher, then the rest of Europe would already be describing her as an international menace who was seeking to dictate to her fellow European Union leaders in order to advance the interests of her own country.
But a menace is precisely what she is, in spite of her boring style. Consider what she has been doing over the past year or so. As the crisis in the eurozone has developed, she has repeatedly declared her belief that the single European currency must survive if the EU itself is to survive. Yet she has persistently refused to use Germany’s enormous financial and economic resources to bail out those southern European economies whose gigantic debt crises threaten to shatter the unity of the single currency.
Not only that, she has flatly refused to allow the European Central Bank to do what other central banks like the Federal Reserve in the United States and the Bank of England would do in similar circumstance – namely, print money with which to buy up the debt of these stricken countries so as to drive down the interest rates which they have to pay on the borrowing that keeps them afloat. She has treated the Frankfurt-based ECB as little more than a branch of the German central bank, requiring it to follow the same sternly straight-laced monetary policy as Germany has pursued domestically since the war.
Instead, she has insisted that the citizens of these countries must endure crippling austerity regimes to qualify for help from the rest of Europe, in spite of the manifest fact that this austerity ensures that there will be no economic growth from which it might eventually be possible to repay the outstanding debt. Greece in particular has been condemned to a perpetual downward spiral which – given that country’s recent history – could well end in revolution, either from the left or, more likely, from the right.
Thus the ultimate outcome of Angela Merkel’s tight-fisted, tight-lipped authoritarianism is likely to be the exact opposite of what she apparently wants. Far from ensuring the survival of the euro, she may well prove to be the force which ensures its breakup. Why she can’t see this is incomprehensible. True, her sternly orthodox economic outlook used to be fairly widely shared. But not any more. One by one, her intellectual allies have been peeling off. The International Monetary Fund, under its new boss Christine Lagarde, was among the first to change its mind. Then the credit agency Standard & Poor’s jumped ship at the moment when it downgraded the credit-worthiness of no fewer than nine eurozone countries, including France, arguing that more austerity would be counter-productive.
The conversion that has astonished me most is that of The Economist. I have been a regular reader – often with gritted teeth – since the 1940s and, throughout that long period, it has been a consistent advocate of free-market, devil-take-the-hindmost capitalism. But last weekend it came out, all guns blazing, against Merkel’s determination to ram austerity down the throats of the Greek, Italian and Spanish peoples. It concluded one of two highly critical articles by arguing that resentment of Germany as the ringleader of European intolerance is already rising, and that a populist revolt in debtor countries would be the biggest threat of all to the survival of the euro.
“Mrs Merkel should remember that”, it added, menacingly.
However, we need have no doubt that Angela Merkel does indeed want the euro to survive, because Germany has done very well out of it – and promises to continue to do well out of it in the future. Indeed, to a considerable extent it has been the foundation of the economic success that gives such muscle to Merkel’s moralising. This is because being tied to so many smaller and weaker economies has provided Germany with a euro exchange rate far lower than it would have experienced with the deutschmark.
As a result, Germany’s manufactured goods have been much cheaper on export markets than they would have been without the euro, and thereby have sold that much better. But the exact opposite has been true for Greece, Italy, Spain and the other, weaker countries. They have faced an exchange rate far higher than would have prevailed under their original currencies, not least because they have been unable to devalue their way out of trouble.
So Germany’s much-vaunted success as an exporting nation has been at least partly achieved at the expense of the very same euro countries which Merkel is now lecturing and bossingabout so insufferably. It is little wonder that Mario Monti, the unelected technocrat who is now Italy’s Prime Minister who is trying hard to do Merkel’s bidding, is growing increasingly exasperated with her refusal to play Germany’s full part in the operation to save the euro.
Two final points. The first is that all this simply serves to underline the huge service done by Gordon Brown in keeping us out of the euro – a service which Tony Blair was secretly trying to undermine, according to Peter Hain’s new book. The second is that one of the last people still loyal to Chancellor Merkel’s austerity doctrine is our own Tory Chancellor, George Osborne.
