Angela Merkel has made her choice: “I support Nicolas Sarkozy on all fronts,” she told reporters in Paris. This is not surprising. It is “perfectly natural” to support fellow conservatives, she explained. Yet, this alliance is dressed in historic terms: “It’s about the big responsibility we have, the construction of Europe. We are surrounded by competitors, we have to show them that we are capable, that France and Germany together within Europe can make all of Europe successful,” Merkel said in a joint interview with Sarkozy on the two state-owned television channels France-2 and ZDF. Referring to their coalition, her French counterpart seconded nervously: “In order to avoid a catastrophe, we needed the total collaboration between France and Germany”.
One may think that in these difficult times, the renewed Franco-German axis is a good thing. Unfortunately, this is not the case. Today, it is the “total collaboration” between Merkel and Sarkozy that is driving Europe into the catastrophe.
No doubt, Mrs Merkel is in the driver’s seat – with disastrous consequences. Merkel has made about every mistake in the Euro crisis one could possibly make. At the early stages, she fuelled doubts about Germany’s commitment to European unification by hinting that Greece should exit the euro. That made financial markets nervous and increased the bill for the subsequent rescue effort. German public opinion was not amused. Merkel then stingily kept her purse closed and played the chauvinist card before local elections. Instead of calming markets, she imposed austerity programmes on Europe, which made it ever more difficult to balance budgets. Finally, Merkel’s insistence on making banks pay, reassuringly called “private sector involvement”, nearly brought transactions in the Euro capital and money markets to a standstill. Only the very courageous liquidity programme by the ECB has avoided the total collapse of the European monetary economy.
Merkel’s financial cut-back orgy, which she did not apply to her own country, may reflect ordo-liberal anti-Keynesianism, the house-ideology of Germany’s conservative “social market economy”. It has, however, strengthened German competitiveness at the expense of others and reinforced output losses in the South, thereby increasing the gaps in public finances and throwing millions of people into unemployment. Such policies have devastated Europe already once before: Adolf Hitler only came to power after Chancellor Brüning had consolidated Germany to the point of economic collapse. Franklin Roosevelt once said: „the very soundness of our democratic institutions depends on the determination of our government to give employment to idle men”. This time Chancellor Merkel pushed the South into a double-dip recession and ever-rising unemployment, which could ultimately result in the break up of the European Union.
Where was Sarkozy in all that? Although the French government has, on several occasions, managed to stop Merkel’s Germany from making things worse, Sarkozy has been fighting a losing battle. For, while France had accumulated competitive advantages under Mitterrand and Jospin through competitive disinflation, these advantages were lost once conservatives were back in power after 2002 (the re-election of Chirac). The situation has deteriorated dramatically under Sarkozy. French unit labour costs have risen 6% above the Euro area average, while Germany’s have fallen by 7% below that level. President Sarkozy has sought to compensate this loss of competitiveness by public deficits: every year France has borrowed nearly as much as Germany and Italy together. No wonder, rating agencies have downgraded French debt! The political consequence has been Sarkozy’s total surrender to Merkel. He now promotes the “German economic model” for France, but he has not understood that economically France and Germany are provinces of Euroland.
Sarkozy’s opponent François Hollande has become the lone challenger to Mrs. Merkel. “Socialists live in Europe” he has declared and he has vowed to re-negotiate the fiscal pact by which Merkel hopes to germanify Europe. This fact explains why the German Chancellor has thrown her weight behind Sarkozy, the conservative candidate; even if her foreign minister was quick to point out that party support was not in the interest of the German state. It will be harder for Merkel to dominate a socialist government in France than a weakened Sarkozy.
However, an open conflict between France and Germany is the last thing Europe needs. If this were to happen, financial markets would become hysterical. The real problem underlying the Merkozy fusion is the undemocratic way of governing Europe. All European citizens are concerned and affected by policy decisions concerning the euro, but at present these decisions are made by the Merkozy coalition. Merkozy is blackmailing Greece into unbearable and unsustainable austerity by withholding bailout funds. But Greek citizens have no power to change mistaken policy orientations or remove Merkel or Sarkozy. In Italy la gente brava has seized the occasion to throw out Berlusconi, but how long will Monti last if the recession pushes up unemployment? With the forthcoming election, the French now have the opportunity to remove Sarkozy, but Merkel will remain and Europe will suffer. This way of running Europe cannot go on for much longer.
Europe’s disease is called intergovernmentalism. Half a century ago, Europe needed to heal its wounds from two disastrous world wars, crimes against humanity and intolerable dictatorships. Overcoming the shadows of the past required European policies to be firmly grounded in the democratic legitimacy of nation states. Thus, nation states have built an “ever closer” European Union. In the process they have generated many public goods, such as the euro, which belong to all European citizens. As we are witnessing every day, these public goods can no longer be governed efficiently or legitimately by the voluntary cooperation of 27 national governments. A proper democratic European government is needed.
In a democracy, citizens jointly appoint a government to administer their common goods. They are the sovereign, not states or governments. They transfer power temporarily and take it back in general elections. When Merkozy make European decisions, they are not authorised by all European citizens concerned. They represent partial interests; the tail wags the dog. Setting up a European government does not mean that Europe would replace the nation state. A European government should simply complement national governments by assuming responsibility for what all Europeans share. I call that the European Republic. It is the way out of Europe’s crisis.
Where does that leave France and Germany? National identities have a long shelf-life. Fois gras and Schweinshaxe will not disappear; nor will the different models of organising the welfare state. What is needed is a new political consensus that allows citizens to assume responsibility for their common affairs, and both France and Germany can contribute to making it happen. Republicanism is at the core of French political identity. It has a long tradition going back to the Roman Republic and emphasises the fact that individual citizens and not cultural communities are responsible for public affairs. Federalism is the political principle on which Germany is built. Neither of these principles can be transposed directly to the European level, and yet, both must be articulated in new ways in order to sustain Europe’s public goods. France needs to understand that La république peut être une et divisible, which means that different public goods may need different levels of government. Germany must learn that the Bundesrepublik is first of all a republic, where citizens and not governments or states have the final say. This would be the new shared consensus by which France and Germany could save the euro and actually make Europe really successful.