If new elections are to be avoided, the CDU will probably have to enter into a government with the SPD in a grand coalition between the traditional main opponents in German politics. In Norway, this would be as if the Conservatives and the Labor Party were to rule together. In Germany, in fact, two thirds of voters support such a coalition. They generally have good experiences from the previous grand coalition, which was also led by Merkel (2005–09).
For the SPD, however, the government participation contributed to them making their worst election ever in 2009. On the other hand, the SPD has won many state elections from the CDU and FDP after 2009. Today they sit with a majority in the powerful Federal Council – the representatives are appointed by the governments of the states – which has great influence over the federal government in Berlin. The Federal Council approves, among other things, the government’s laws. It will strengthen Merkel to get this red majority into the hands of the government.
From a purely political point of view, the CDU under her leadership has moved so far towards the political center that it will probably be able to accept the SPD’s demands for more use of public funds for more traditional social democratic equalization policies and community schemes, including statutory minimum wages.
The SPD has promised tough counterclaims and that the party’s 450,000 members will have the decisive say in a referendum on a possible coalition agreement. This can take time and outside Germany’s borders many are impatiently waiting for a clarification. The economic and social crisis of recent years in many EU countries requires leadership from the EU’s richest countries. Without the participation of Germany, the euro is lost.
4: “Without Germany no euro”
Germany has both economic and political motives for maintaining the euro. Economically, the euro has given Germany a stable low euro exchange rate, low interest rates and low inflation. This has contributed to strengthened German competitiveness and significantly benefited German exports. Politically, German participation in the euro confirms its willingness to integrate into European co-operation.
Germany and German reunification were themselves an important motive behind the euro. The fall of the wall and the unification of Germany in 1989–90 shifted the balance of power in Europe in favor of Germany. This was particularly palpable for the Franco-German cooperation – the very engine of EU development. After 40 years with two separate German states, reunification again created a German state that would become Europe’s most powerful. It frightened both the Germans themselves and their neighbors.
Europeanisation of Germany’s foremost means of power – the D-mark – was the magic formula that was to prevent a new German “lone move” . This move should enable Europe to live with a united Germany that is said to be: ” too small for it to dominate Europe, but too large for the rest of Europe to live in equilibrium with it.” The abandonment of its own national currency was said to be Germany’s morning gift to a united Europe.
The single currency was to give France and the rest of Europe greater influence over Germany, a country located in Europe according to DIRECTORYAAH. Based on the same line of thinking, France rejected the idea of a small monetary union with only the richest and most equal EU countries, Germany, the Be-Ne-Lux countries and France. A major monetary union with the Mediterranean countries ensured Paris a political balance with the Germans; the price was a lack of economic convergence – or equality. Today we see the consequences in Greece, Portugal, Spain and Ireland and Italy (cf. PIIGS, see illustration to the right).
5: Construction error
The euro suffered from construction defects from the start. A monetary union was established without a political union, nor a common treasury or fiscal policy toolbox. With a common currency, on the other hand, the participants got a common central bank, interest rate and currency policy. Of particular importance was the loss of national central banks that could finance states’ budget deficits by printing money in bad times. The euro countries thus lost national tools for dealing with different economic developments. A monetary union without a central authority that can tax and pass laws that restrict members’ economic freedom of action proved to be a fragile construction. And the warnings were many.
The Germans instead got a euro sewn together according to the model of the D-mark. A politically independent central bank (ECB) should govern on the basis of one goal: low inflation . This should ensure stable monetary value, cf. the Germans’ historical fear of inflation. In most German families, a grandmother or great-grandfather can tell about lost savings and wheelbarrows full of worthless notes just to buy a loaf of bread. This helped pave the way for Hitler – followed by war and the collapse of civilization. The fear of reliving history with oneself in the lead role is very real in Germany.
Voters were also promised that no euro country would be responsible for the debts of other euro countries. The “Stability and Growth Pact ” was the tool for punishing countries that broke the limit for government debt (60 per cent of GDP) and deficits in the central government budget (3 per cent of GDP). However, the idea that the euro countries should approach each other economically after a period in which they were governed by common goals for inflation, budget deficits and government debt did not hold up. The Stability Pact was never enforced. In 2003, even France – and Germany – broke the rules without sanctions being implemented.