Walker's World: Europe's German problem

PARIS, Dec. 13 (UPI) -- The old nightmare, the one that was supposed to have a stake driven through its heart in 1945, is back. Europe has a German problem again.

It wasn't the sight of German troops marching into France last week, the first German soldiers to be stationed there in peacetime. They came by invitation, a symbolic gesture to buttress President Nicolas Sarkozy's statement at a summit with German Chancellor Angela Merkel that "We will defend the euro, because the euro is Europe."

It is the euro crisis that explains Germany's new pre-eminence. The most obvious main effect of the financial crisis has been to reveal the fragility of the euro. But lurking behind that is a deeper reality: that Germany's growing economic dominance of the eurozone implies a parallel political power that Germany's leaders are increasingly ready to wield in the national rather than the European interest.

Not only are Europe's other leaders becomingly uncomfortably aware of this new German attitude but some are prepared to say so openly.

"I am concerned that in Germany, the federal and local authorities are slowly losing sight of the European common good," Eurogroup Chairman Jean-Claude Juncker said last month in an interview with Germany's Rheinischer Merkur.

Juncker is often dismissed because he is the long-standing prime minister of tiny Luxembourg. But he has been at the top level of European politics for more than two decades, as premier since 1995 and as finance minister since 1989. The only man still in office who was at the birth of Europe's Maastricht Treaty and at the negotiations that led to the euro, nobody else has a fraction of Juncker's experience.

Last week, Juncker put forward a possible solution to the euro crisis; that instead of each country issuing its own national bonds denominated in euros, there should be a single E-bond, guaranteed by all the euro members. That would, at a stroke, end the wild gyrations of interest rates being demanded by the markets for different countries. It could also be structured in a way that would reflect the current weakness of countries like Greece and Ireland by discounting the conversion rate from national bonds to E-bonds.

Juncker launched his plan with Italian Finance Minister Giulio Tremonti (the only minister in Berlusconi's government to command widespread respect) but Germany rejected it out of hand.

"Germany's thinking was a bit simplistic on this," Juncker then told Die Zeit. "They are rejecting an idea before studying it. This is very strange. This way of creating taboo areas in Europe and not dealing with others' ideas is a very un-European way of dealing with European matters."

This isn't the first time Germany's heavy-handed ways have inspired public rebuke from an EU partner. When Germany agreed to co-finance a pipeline under the Baltic Sea to import Russian natural gas, while avoiding the land-based pipelines through Poland and Ukraine, Polish Foreign Minister Radosław Sikorski likened it to the Molotov-Ribbentrop pact of 1939, when Hitler and Stalin secretly agreed to carve up Poland between them.

Then former German Chancellor Helmut Schmidt celebrated his 92nd birthday last week by giving an interview in which he said "the present German government is composed of people who are learning their business on the job. They have no previous experience in world political affairs or in world economic affairs."

Schmidt went on to say of Germany's central bankers, "In their innermost heart they are reactionaries. They tend to act and react too much under the aspect of national interests and haven't understood the strategic necessity of European integration."

No other European leader has forgotten that the first euro-crisis in Greece last spring exploded out of control because Merkel refused to act while awaiting the result of regional German election. The result was furiously anti-German newspaper headlines in Athens and magazine covers that depicted Merkel wearing a Hitler moustache.

In November, it was Germany that triggered the latest euro-crisis over Ireland, when Germany began insisting publicly that Ireland apply for EU bailout funds, rather than risk embarrassment to German banks exposed to Irish debts.

Merkel's stance "hasn't been helpful," Irish Prime Minister Brian Cowen told the Irish Independent on Nov. 12, nine days before Ireland was driven to seek the bailout.

On Dec. 3, Spanish Finance Minister Elena Salgado said Spain "absolutely" didn't need a bailout and urged the German public "to think in terms of Europe" when it considers how to react to the financial crisis. "The euro has been good for us but also good for Germany," she added. She was responding to leaks from the German Finance Ministry that German officials wanted Portugal and Spain to apply for the Irish-style bailout.

Luxembourg, Ireland and Portugal may be small countries but when big countries like Poland and Spain mutter about Germany throwing its weight around Europe has a problem. Asked in his interview whether Merkel understood this, Schmidt replied, "My feeling is that Merkel doesn't know she does it."

Everybody else does. And this is becoming a problem as European leaders prepare for this week's summit. It will seek to address the core problem of the eurozone; that Germany's massive trade surpluses with its EU partners means that Germany is playing the same role toward Europe that China plays to the United States. The imbalances are unsustainable but perhaps understandably in its new growth-driven mood of self-confidence, that isn't something Germany wants to hear.