President Donald Trump is widely seen by allies of the United States as posing a potentially serious threat to the cohesion of the NATO alliance and – more broadly – to the post-Second World War global economic, political and security system. The European Union, fearful of the rise of right-wing populism and nationalism across the Atlantic, rightly insists it will meet both this challenge (and the disruption caused by the UK’s prospective Brexit) by strengthening its cohesion and effectiveness.
The EU, however, faces another, equally dangerous challenge but this time one from within its own ranks. The primary source of this threat is, moreover, to be found in Germany – the country which, more than any other, has shouldered the main responsibility for giving enlightened leadership to the long process of European democratisation and unification over many decades.
Wolfgang Schäuble, the German finance minister and the Ayatollah of current EU austerity doctrine, may seem an unlikely candidate for comparison to Trump. He has a distinguished record in German politics over decades for his advocacy of greater economic and political European integration.
He is also a man who has shown impressive courage and resilience in recovering from a terrorist life-threatening assassination attempt. But his long, unchallenged hegemony over government economic strategy in the EU’s German economic powerhouse now risks igniting another, potentially lethal, phase of instability in the Euro area single currency system.
It remains to be seen whether reports of another looming crisis in relations between Greece and its Euro area creditors will prove quite as terminal as some suggest. It may be that the reported “showdown” will – once again – be deferred to another day. Greece may continue to be drip fed financial loans to prevent outright collapse – but without tackling the crisis at root.
After years of drastic public spending cuts imposed on the left-wing Syriza government tens of thousands have been made unemployed, living standards reduced to a level not experienced in decades and the sick even denied essential medicines. But Schäuble believes that Greece needs more and not less of this austerity water boarding.
The German finance minister refuses to bend to pressure, even from the IMF, for a drastically needed reduction in the level of debt burdening the Greek economy. It is debt incurred both as a result of irresponsible borrowing by previous Greek governments and equally if not more irresponsible lending by profit-hungry German and other European banks. He openly warns Greece if it does not toe the line it may have to leave the Euro-area whatever the consequences for Greece or the EU.
Schäuble protests that the most important priority for Greece is not the size of debt burden but its low-level of economic competitiveness. But he fails to explain how the massive economic burdens imposed on Greece over recent have done anything or can do anything for a revival of competitiveness.
The Berlin government should recognise how its own contribution to the plainly asymmetrical character of Euro area economic development have made matters worse. German export competitiveness has been artificially buoyed over the past decade by an overly low exchange rate for the Euro – itself a product of the chronic weakness of the southern Euro area economies.
Thus far, Schäuble, supported by cohort of doctrinal austerity advocates in the Berlin finance ministry and the Bundesbank, has been able to resist European and even growing German domestic pressure for a major EU economic stimulus programme. Belatedly, the opposition Social Democratic Party (SPD), used to playing chorus to the right-wing doctrinaires, has maybe begun to find its voice under its new leader, Martin Schultz to demand a change of priorities.
Wolfgang Schäuble, a highly intelligent and cultivated man, seems a very different type of figure to a narcissistic, Twitter-obsessed US President. Indeed, he is. But the German equivalent of the Trumpite right-wing populists in the US – the hard right of the Christian Democrats and the strutting militants of the far right Alternative fur Deutschland – head the cheer-leaders for Germany’s purblind Euro-area economic dogmas.
Thus far, Chancellor Angela Merkel has kept her counsel – seemingly feeling not strong enough yet to challenge her finance minister’s judgement. But with her own domestic popularity starting to fade and an election looming, might she yet assert herself over the future direction of Euro-area policy. After all, if miscalculation in Berlin were to trigger another Greek crisis and, this time, lead to a “disorderly exit” of Greece from the Euro (Grexit), Merkel’s hopes for an EU-wide economic and political renaissance after the shock of Trump and Brexit, would receive a terrible blow.
Maybe we will have await Germany’s general election this year (September) for economic reason to re-emerge. But can Germany and the EU wait that long?