Dear friends,
Germany wants to be back on stage! With the new government, it seems like some have finally understood that we have to take action and invest in our infrastructure, boost the economy and make innovation happen. It’s about time! Germany is an important pacemaker for Europe, but it has been too slow and too timid for years. The new coalition has chosen to tackle a few genuine problems – and quite a few imagined ones
But Friedrich Merz and his CDU have a tendency to move fast and break things. Which is a good thing if you are a new start-up, but maybe not the best idea for Europe’s largest member country. Germany is acting as if basic rules and agreements don’t apply to us. I don’t like this attitude of being too big to fail. We are in danger of upsetting our neighbours and of losing our credibility in Europe.
SETTING THE WORST EXAMPLE
One of the very first actions of the new government was to announce stricter border controls along all German borders – to tackle “illegal” immigration. The border police are now turning back anyone without a valid visa, even if they apply for asylum. A clear breach of German and European law, yet Germany went through with it. And this was implemented straight away, even without consulting the Social Democrats in the coalition properly. And especially without consulting the neighbouring countries.
It is a purely symbolic measure – closing the borders doesn’t solve a single problem, but creates a lot of new ones. It damages the Schengen agreement which has guaranteed open borders and free travel within the EU for 40 years now. I know Germany isn’t the first country to circumvent the rules and implement regular checks, but the scale and determination are on a whole new dimension. Germany has always pushed for European answers to deal with migration. Now that these are finally on the table, and in a situation where less and less people are actually applying for asylum, the country goes rogue and calls a national emergency. That’s pure populism, and it sets a dangerous precedent for a domino effect across Europe.
Who are we now to point our finger at countries like Hungary when they ignore European law? They can now point back at Germany saying “Hey, sue these guys first!”.
RULES AREN’T JUST FOR THE OTHERS
Friedrich Merz doesn’t seem to bother a lot about EU regulations. This also shows in the massive investments in infrastructure, military resilience and economy. Which are in principle a very good idea. The problem here is that the government is overstretching the EU’s fiscal rules. A member state should keep public debt below 60% of GDP – but Merz’ plans will land Germany somewhere around 80%. Who cares? Well maybe all the other European countries we have lectured and insulted over the years when they didn’t comply with the fiscal rules.
For decades, German governments and especially the CDU have banged the drum of stable public finances. They have clung to the illusion that Germany’s zero new debt strategy would work out fine and become a role model for the EU. We’ve called others lazy or incompetent when they were struggling with high debt during the economic crisis. We’ve even sent accountants and lawyers to countries like Greece, telling them how they wasted money and lived beyond their means. And now that Germany is struggling, all of these rules suddenly don’t apply anymore? CDU officials will tell you that it’s super important to ramp up the German economy now because it’s the backbone of the continent, and they are right. But the message they are sending out is still a huge slap in the face of our partners.
EUROPE IS THE SOLUTION
What the government will never admit: For a long time now, Brussels has had Berlin’s back when it came to new investments, counter measures against challenges and new debt. During Covid, the fiscal rules were already lifted to give member states some air to breathe. When Russia invaded Ukraine, the EU countered the soaring gas prices and helped Germany get out of their unholy and self-inflicted dependency of Russia without paying too high a cost. Now that every country in Europe is rearming and ramping up their investments in the military sector, again these debts are exempt from the fiscal rules. All these “hidden” exemptions have helped to keep up the illusion of solid state finances until now.
It’s clear that we need a lot of money now, and this will probably mean new debt. But how about doing it without snubbing our partners? There is a way for Europe to work together – and it’s called Eurobonds. The idea is not new: Europe takes on debt together to counter big challenges. The countries with lower interest rates – like Germany – would vouch for others who have more difficulties in securing good loans. Until now, the CDU has been totally against the idea. But they cannot ignore that we are all in this together. Luckily, Friedrich Merz has already shown that he doesn’t care much about former agreements, obligations or restrictions. How about doing it right this time and giving up the resistance against shared debt?
For Europe, it’s a way to become stronger. And for Germany, to save face.
Yours
Damian
