According to Jens Weidmann, the young economist who became President of the Bundesbank after a meteoric political career in the shadow of Angela Merkel and is surely the most influential member of the Governing Council of the European Central Bank (ECB), some types of interest at a rate of six percent are not "the end of the world" and therefore are not sufficient grounds for the ECB to mobilise to relieve the pressure on Spain in the debt markets. One is curious to know just how far Weidmann is aware that Spain and Germany are in a monetary union and also the extent to which he shares in the concern that such spreads in the interest rates call into question the ultimate meaning and existence of that union.
We might suppose that for Weidmann, whose mandate includes neither growth nor employment, merely price stability, it would be an inflation rate of six percent that would spell out the end of the world for sure. Fortunately, the President of the Bundesbank can sleep easy, as the average inflation in the eurozone is 2.7 percent. In Spain, moreover, for greater peace of mind for Weidmann, inflation is at 1.8 percent and in Greece at 1.4 percent, which is lower even than in Germany (2.3 percent).
The value of that statement by Weidman, so sincere and yet so clumsy, is that it explains with total clarity what is happening to Europe, and very directly and particularly to Spain.
German has yet to learn the lessons of Weimar
The lack of insight and sensitivity that is bogging us down dates back to the blindness of the French elites at the end of World War I, who stifled any chance of recovery and economic growth in Germany by imposing punitive war reparations. Some of the reparations, while fair, since Germany had started the war, gave way to a mixture of populism and irredentism that lit the fuses of Nazism and World War II. It’s still an irony that Germany, which has admirably overcome Nazism, could not do the same with the inflation that brought down the Weimar Republic. Undoubtedly, if the euro ends up collapsing or if the European Union itself falls apart, historians will reach for phrases like this to explain what went wrong in Europe and to describe the errors that were made.
With its blind spots and with a similar attitude (do the right thing though the world perish), the German government is not only endangering the European Union but is also encouraging the emergence of anti-German sentiment. One example: although in Spain the image of Germany as a country is still good, the most recent poll by the Real Instituto Elcano shows that three out of four Spaniards (73 percent) believe that Germany does not take Spain’s interests into account, and even more unanimously, 87 percent believe that "the country in command in Europe is Germany". Note: not the country that commands "more", but the country that commands, full stop.
France both weak and servile
**Has the time come to say "enough" to Berlin? Yes, no doubt. How? By coordinating the national reform agenda with the European growth agenda – from Brussels. This requires the restoration of political and institutional balance in Europe, which has been blown sky high. On the one hand, the European Commission, which should speak for all the states, has been taken out of play as a political actor. At the beginning of his second and final term, the President of the Commission, Barroso, made out as if he would turn into a true leader. But when the going got tough he simply dropped the sustainable growth agenda that he had been pushing for years.
On the other hand, France, which has always served as a counterbalance to Germany, is for now in the hands of someone like Sarkozy, who compensates for the failure of his reform agenda at home with the unworthy and typical practice of the servility of the weak towards his betters (Germany) and the arrogance of the strong towards his inferiors (Spain). That France, unrecognisable, has become a problem for the future of Europe as serious as the rigidity that dominates the Bundesbank. Hollande may turn out to be a salutary shock: to France, to the Commission, and to Germany itself.**
A Hobbesian Europe
In a longer version of his article published by the Financial Times, José Ignacio Torreblanca goes further in his denunciation of austerity and concludes with what could become a rallying cry in the coming months –
The fiscal compact, the most unbalanced and asymmetric treaty member states have ever signed, is the best illustration of the new Europe: while austerity is strictly enforced, growth is barely promised. In the good old EU, member states were equal and treaties represented a compromise between competing visions of Europe. Now, Europe is about asymmetries in power and fear for the future. Europe now resembles Thomas Hobbes’ description of man’s life in its natural state: “poor, nasty, brutish and short.” Two years on, not a single growth measure has been adopted. Time to say: basta!