Imperial Life in the Merkel Republic

Imperial Life in the Merkel Republic The National Interest, Oct 24, 2013

by Tyson Barker October 3 marked the twenty-third anniversary of German reunification. But on the eve of assuming the helm of her third government, Germany’s once-and-future chancellor, Angela Merkel, celebrates another unification: that of the German people behind her brand of leadership.

Through the power of sheer attrition, she has transformed the political landscape in Germany and, through it, in Europe. Merkel is perched atop the entire European political system like an inert leviathan, judiciously but rarely employing power in a style of leadership that makes an art of “leaning backward” the defining attribute of the Merkel era in Germany and throughout Europe.

A parade of global political and economic leaders has come to Germany recently to critique this form of leadership. They have hoped that a direct and earnest entreaty on Merkel’s home turf might produce some give in the country’s unyielding image of itself in Europe and the world.

Poland’s energetic foreign minister, Radosław Sikorski, broke deep-seated Central European taboos with a portentous calculation: “I fear German power less than I am beginning to fear German inactivity.” Billionaire Hungarian-American financier George Soros, in April 2013, issued an appeal against inaction. In calling for a decisive choice between a German exit from the eurozone and the common issuance of eurobonds across the currency area, Soros stated that “the crisis is now threatening to destroy the EU itself. That would be a tragedy of historic proportions, which only German leadership can prevent.”

This past summer, U.S. President Barack Obama stood on the eastern side of the Brandenburg Gate to proclaim: “…I come here today, Berlin, to say that complacency is not the character of great nations.” Sitting on the stage behind President Obama when he delivered his most searing indictment in an otherwise innocuous speech, Merkel applauded politely. She has no doubt been privy to the subsequent chorus of agreement from the international community.

Despite global consensus pushing against it, Merkel’s Germany trudges forward or, rather, remains in place—self-satisfied, reflective, inward-looking. Merkel’s potent political resonance with the population is based on her inherent caution. With some of the lowest birthrates in Europe, Germany’s aging demography might lend itself to even greater exercise of political restraint. After all, the generational center of gravity in Germany is inching upward.

But it is the eurozone crisis that has led to a significant philosophical shift in Germany’s negotiating behavior. For reasons historic, geographic and political, Germans have maintained a

nested identity based on layered associations and relations. More than most other states, modern Germany has held as a strategic imperative the necessity of aligning its principal national aims and redlines with those of its partners. Germany’s relations-based negotiating style leaves observers with the sense that Germans are overly accommodationist. This relational negotiating style continues to hold globally, particularly with countries that have a growing economic relationship with Germany. Within Europe and to some extent the United States, however, this logic is no longer applicable.

A new division of labor has developed in Germany’s interstate relations recently. On most strategic questions, decision-making authority has been centralized in the chancellery to the detriment of the foreign ministry. This consolidation of power in the chancellery on seminal questions of foreign policy has been widely noted. Less noted, however, is the new role of the finance and economy ministries as the federführend (“responsible”) ministries in German foreign policy. They have been carving up the world between them.

While the broad strategic strokes of German foreign policy are made in the chancellery, the finance ministry has the lead on Europapolitik and the economy ministry plays a principal role in Weltpolitik. This gives a particular geoeconomic accent to the execution of German foreign policy, be it exclusive concessions on raw materials in Kazakhstan, an unseemly increase of weapons and dual-use exports to authoritarian regimes in countries such as Algeria, Saudi Arabia and (until 2011) Syria, or an emphasis on the Transatlantic Trade and Investment Partnership (TTIP) as the organizing logic for Europe’s relationship with the United States.

“The Tyranny of Greece over Germany” Harvard scholar Joseph Nye contends that the character of modern political leadership tends to fall into one of two distinctive castes. Transformational leadership places the means of change on forceful personalities and visions, and the ability to mobilize and shepherd public opinion. In contrast, transactional leadership is more reliant on managerial prowess, design and control of institutions imbued with flexibility, and the capacity for self-correction and durable consensusbuilding among disparate groups. Merkel’s leadership style belongs to the latter category, albeit with one significant caveat: It applies only at the national level, often with caustic effects at the European level.

In the eurozone crisis, Germany has been the primary driver of a shift in EU policymaking from the “Community” method—a supranational approach driven by the Commission and based on consensus—to what Merkel referred to at a 2011 College of Europe speech as the “Union” method—an intergovernmental process centered at the Council, where relative state power drives decision-making. The result has been two-fold: 1) It has repatriated decision-making authority preponderantly to the German governing coalition; and 2) It has led to an ossification of decision-making. The German government’s aim has not been to concentrate authority wholly in the chancellery, but to limit European decision-making primarily to its domestic framework.

Germany has a “tradition of divided authority,” in which power is spliced between the chancellery, Bundestag, federal Länder, the constitutional court, Bundesbank, and German public opinion. This leads to a gradualist approach to policymaking. It is within this diffuse, but

managed, power constellation that today’s German government feels most comfortable conducting its Europapolitik.

From 2010 to 2012, German policymaking on crisis management in the eurozone was defined by four characteristics. These characteristics are: 1) the primacy of austerity as a policy proscription followed distantly by structural reform promotion; 2) delayed decision-making driven by domestic political timetables in Germany; 3) lowering expectations on the eve of major political junctures such as EU summits and post-summit initiative clawbacks; and 4) vague and undeveloped hints at future political union in Europe. Since the onset of the 2013 election season, these four guiding principles have held.

Merkel continues to insist that budget cutting and growth are complementary and should be at the heart of crisis management. At the same time, the 2012-13 debate around banking union has been a case study in the third principle, as Germany has insisted on watering down the scope of the European Central Bank’s (ECB’s) banking supervision, delayed and limited enforcement, and nationalized risk. The foot-dragging on banking union is currently the central fault line in eurozone policy, just as acute fiscal pinches in the eurozone South and intra-European macroeconomic imbalances were previously. Using the example of American leadership in the management of Iraq in 2004, Nye states that “…the moral flaws were not simply in the prison guards, but also in the leaders who failed to monitor a flawed institutional framework.” This same logic could be applied to German leadership’s failure to adequately address the flaws in the EU’s incomplete architecture.

Germany’s ambivalence to Europe, coupled with the U.S.’s gradual political withdrawal from the continent, has left a vacuum in Europe, one that has been tenuously filled by the ECB. The post-Lisbon EU and its institutions have been rendered less powerful as a political entity and as a normative body. The EU’s normative decay and the economic downturn has weakened Europe across four dimensions, all of which could affect U.S. strategic interests on the continent. First, it has weakened the soft power that the EU has traditionally exercised through enlargement, the EU’s most potent foreign-policy instrument in the region (Turkey, Ukraine). Second, it has led to a democratic backslide as several recently acceded states have rolled back facets of the acquis communautaire (Hungary, Romania). Third, it has indirectly contributed to regional friction in states with strong regional identities (Spain, Belgium, the UK). Finally, it has accelerated the erosion of the traditional Volkspartei structures by insurgent parties of the extreme right and left.

This process has made coalition-building unwieldy at the national level (Greece, Italy, Spain) and will also impact the political landscape in the European Parliament after the 2014 elections.

Decoding Atlanticist Germany Germany’s conduct with its Atlantic partners has demonstrated a similar disinclination towards shaping public opinion. Merkel curates opinions across the German population, finds the center, and then adroitly occupies it. Sometimes this leads to alarming decisions for Germany’s partners and allies. Germany’s 2011 abstention from the vote on UN Security Council Resolution 1973 authorizing the protection of civilians in Libya that ultimately led to Muammar Ghaddafi’s removal from power has been almost universally maligned. The recent decision to delay adding Germany’s signature to a joint statement on Syria at the September G20 summit in Saint

Petersburg that “condemned in the strongest terms” the Syrian regime’s use of chemical weapons plays into the same narrative that informed Germany’s decision-making in Libya.

U.S. policymakers, baffled by Germany’s willingness to buck western consensus in the eurozone crisis and the Western alliance, have grappled with how to form a more solid strategic relationship with today’s Germany. The U.S. has used all of the symbolic arrows in its quiver recently to woo the Merkel government. She was invited to speak before a 2009 joint session of Congress and was given a White House state dinner in 2011. President Obama, as previously mentioned, also visited Berlin to speak at the Brandenburg Gate at Merkel’s side, a symbolic hat tip to her statesmanship right in the midst of Germany’s election season. Perhaps most importantly, the Obama administration has given its full support to a long-held goal of Germany foreign policy: a trans-Atlantic free-trade agreement. The TTIP is a strategic project of Merkel’s Germany, the foundations for the pan-Atlantic trade zone having been laid during Germany’s 2007 EU presidency with the establishment of the Transatlantic Economic Council (TEC).

Most European states tend to toggle between their Atlanticist and European identities. This is certainly the case with Poland, the Czech Republic, and the United Kingdom. Germany, in contrast, tends to express its Atlanticist and European identities simultaneously. History is replete with examples of this, such as Germany’s accession to NATO and establishment of the Treaty of Rome (1955-58), signing of the Plaza Accord and the Single European Act (1985-86), reunification within NATO, the adoption of the Maastricht Treaty (1989-92), post-Iraq War rehabilitation of German-American relations, and recovery of the EU constitution through the Lisbon Treaty (2007-09). If smartly managed, TTIP negotiations, once again, could provide the bridge through which both of these identities could be fully expressed.

The infusion of the Snowden NSA leaks into the TTIP talks, however, has become a concern for negotiators. While Merkel was able to deflect the electoral fallout of the leaks when they were most acute, discussion around data protection and privacy continues to simmer among Germans.

Merkel has stated that Europe should see the Internet sector as a strategic economic industry, similar to its views of Airbus and Galileo. Germany is also sympathetic to calls for the creation of a European cloud-computing network wholly separate from existing U.S. cloud services and the use of European R&D funds to create an indigenous industrial base.

Germany has demonstrated itself capable of abrupt policy U-turns. A rapid alignment of interests and actors triggered by unforeseen circumstances can lead to punctuated equilibrium with sweeping, perhaps even destabilizing, policy outcomes. The 2011 Energiewende, the intention to phase out all domestic nuclear-energy production in the aftermath of the Fukushima crisis, is one example of this. Combined with the fervor in Brussels—particularly in the European Parliament—for corrective action on previous e-commerce and information-sharing agreements, the potential for a Datenwende in Europe or the derailment of TTIP remain real.

Two Middle Kingdoms In its relations with emerging powers, Germany has been more consistent in its role as an accomodationist player attempting to avoid or defuse politically sensitive issues in favor of stability that maintains economic ties. This is true for Germany’s relations with East Asia, and

affects the type of partner that Berlin can be for the US in that region. Unlike some of the vocal states of Central Europe, Germany is sanguine about the US “pivot to Asia,” seeing it as a means to stabilize trade routes on which Germany will increasingly rely, with little political or economic cost to Germany itself. But its willingness to expend political capital in the region on issues that could impact its overriding economic interest has thus far proved limited.

China, the Asia-Pacific region’s most consequential actor, perceives Germany as a kindred spirit in the international system. In certain ways, both countries are rising powers. Like two Middle Kingdoms, both states occupy unique positions in the international system and are centers around which dynamic, often turbulent regional state-systems revolve. Both are current-account surplus countries whose growth have been export-driven. But they are looking to slowly move towards greater consumption-driven growth. Both harbor deep ambivalence about calls made by the U.S. and others to assume a greater stake in global governance.

While the German political elite does not share the view of China as a kindred spirit, they are willing to capitalize on this perception, both as a means of building commercial ties with China and as a means of advancing their interests more broadly. At times, this has meant aligning with Chinese interests on trade issues, to the disadvantage of EU partners, and undermining Europe’s strategic goal of pivoting with the U.S. to Asia. This was certainly the case during the recent intra-European clash over imposing countervailing duties on Chinese solar-panel imports that threaten to eviscerate indigenous European solar-panel production. While the European Commission favored the imposition of tariffs, Germany—worried about economic retribution in other export sectors—sided with the Chinese.

The incident demonstrates the role that economic interest alignment and accommodation play in informing Germany’s relations with global great powers. Again, the TTIP could be subject to pitfalls here. Such behavior calls into question the credibility of Europe’s—and particularly Germany’s—commitment to use the TTIP as an a Western geoeconomic caucus through which the US and Europe can leverage their combined economic heft to pressure the Chinese and other rising economic powers to adhere to commercial norms, thereby underpinning the global trading order. This “economic NATO” argument has been the geostrategic rationale driving negotiations for the transatlantic mega-FTA. Germany’s defection from the EU stance on the solar-panel antidumping dispute is an ominous sign.

Renewal Begins at Home As Merkel takes office for her third term as chancellor, Germany sits in the sweet spot of the international system. The center-right establishment made a determined effort to capitalize on this in 2013, creating an anesthetized electoral environment. But this belies the internal tectonic shifts in Germany that could dramatically transform its economy. The complacency that has defined Merkel-era foreign policy also extends inward. Neglected infrastructure, from highways to broadband, is increasingly burdensome for the country’s advanced manufacturing industrial base. Rising energy prices are gradually wiping away competitive wage-productivity ratios and gains from the Agenda 2010 reform. And Germany’s demographic time bomb is fast approaching and, with it, a dramatic reduction of the labor force and concurrent increases in retirement and healthcare requirements on the state. This, too, puts a drag on Germany’s

competitiveness, as the country’s diminishing bench of younger workers affects its ability to innovate.

Crafting a vision for Germany will be Merkel’s greatest challenge and, ultimately, her most lasting legacy. When deflecting criticism of those who argued more than two decades ago for a slower reunification, Helmut Kohl pointed to Ludwig Erhard, the founder of the social-market economy that has since become the foundation of the German social contract: “If Erhard had thought like that, then today we would still be buying shoes with rationing coupons.” Merkel, herself known for a penchant for coupons, should heed that lesson.

Tyson Barker is director of trans-Atlantic relations at the Washington, DC-based Bertelsmann Foundation.