The EU and the German Risk

The “German Problem” has had a profound impact on European history. The term refers to the challenge to the European balance of power caused by the unification of the country in 1871.

German unification at the time created a nation whose strength could not be effectively counterbalanced by its European neighbours leading to tension, animosities and, arguably, two world wars.

From the German Problem to the German Locomotive

European integration, which began in the late 1950s, finally managed to solve this issue. What used to be the “German Problem” became what could be termed the “German Locomotive.” Instead of being a threat, German strength was now an advantage as it became a motor for European integration and economic growth.

But at a time when the European idea is being threatened by an unprecedented wave of euroscepticism, the “German Locomotive” could turn into the “German Risk.”

Risk because the EU is over-dependent on Germany and, thus, its future is bound to it. The EU could – or in the wake of the Brexit vote more accurately said can – lose one or even several of its members and survive, but not if one of these members is Germany.

Germany: The EU’s indispensable member?

Germany is the one indispensable member that the EU simply cannot do without. Should it succumb to populist and anti-EU movements and withdraw, the European project would undoubtedly come to an end.

The reasons for this are both economic and political. From an economic standpoint, as the largest economy and net contributor to the EU budget – which will become all the more significant in the future as the EU is set to lose Britain’s contribution – Germany represents a significant portion of the EU’s GDP and provides a significant portion of its funding.

Germany has also greatly contributed to the bailouts of distressed eurozone states and radiated stability in times of crisis thereby reassuring investors. In short, as Europe’s paymaster, it has propped up the euro and, without it, the currency would not be viable.

Or is Germany the one that should go?

It is true that not everyone subscribes to this view. On the contrary, there are those who argue that Germany is imposing the wrong policies on the eurozone with some – such as George Soros – even calling for it to leave the common currency as a solution to its woes.

It is also true that, as an export nation, Germany has benefited greatly from a common currency, whereas southern eurozone states have had to endure years of austerity with no end in sight.

However, it is important to note the problems of the euro were not created by Germany, even if some point out, rightly, that its policies have not solved them.

Moreover, the countries that face constant economic problems would have to deal with those same home-made problems, with or without the euro.

Many ways to integrate the continent’s economy

Apart from the Euro, there are myriad other economic reasons why Germany is so pivotal for the EU project.

In addition to being a center for business, science and innovation, its central position geographically is also reflected in its firms’ production portfolios facilitating internal EU trade via the integration of suppliers located in eastern and western EU member states.

The political repercussions of losing Germany would arguably be even more severe than the economic consequences.

Foremost among them is that as a founding member and tireless supporter and driver of European integration, Germany withdrawing from the EU would strike a crippling blow to its legitimacy.

Even if the EU did survive in some precarious limbo state, which it almost certainly wouldn’t, losing Germany’s political clout internationally would severely diminish the EU as an international actor.

Even just a few years ago any talk of Germany leaving the EU would have been labelled as preposterous, but a lot has happened in a few years.

Angela Merkel’s political position at home – seeming unassailable until quite recently – is no longer as secure as it once was.

Multiple eurozone mega-bailouts coupled with the migrant crisis which saw Germany taking in over one million refugees have eroded support for traditional pro-EU parties such as Merkel’s own Christian Democratic Union (CDU).

These events have led to growing support for right-wing and populist anti-EU parties. Until quite recently, these groups operated only on the fringes of German politics.

However, their support base has grown substantially as their message has increasingly found resonance among the middle class.

Many people now openly question the level of German engagement in the EU, arguing it is a bottomless pit. As a result, what before was considered to be sacrosanct, the EU itself, no longer is.

Recent regional elections in the state of Mecklenburg-Vorpommern, for example, saw the eurosceptic Alternative für Deutschland (Alternative for Germany) or AfD party beat Angela Merkel’s CDU into third place.

Even more recently the CDU suffered historic losses in elections in Berlin with the AfD again making significant gains.

Initially founded in 2013 on an anti-euro ticket, the AfD is now also attracting those opposed to immigration and is now set to be represented in ten out of sixteen state parliaments. That should act as a serious wake-up call.

The dangerous UK precedent: From UKIP to AfD

The UK Independence Party or UKIP was not taken too seriously until quite late in the game, but it ended up being the successful driving force behind Britain voting to leave the EU.

Right up to the night of June 23, 2016, most assumed this would not happen, demonstrated by the nosedive of the British Pound once the “shock” result was announced.

Coming back to Germany, a major event such as the EU-Turkey migrant deal collapsing leading to another wave of refugees – who would presumably make Germany their destination – would give parties such as the AfD extra ammunition to use against Merkel’s government and increase its support further.

Migration, not economics, is what decided the outcome of the Brexit vote. It should not be assumed that the same issue could not propel a populist party into power in another – and much more important – EU member state.

The danger of a German exit, presumably termed “Dexit” in Germany – though still low is therefore not inconceivable.

Due to aforementioned reasons this would be a deathblow for the EU – unlike Brexit, Grexit, Frexit or indeed any other country initial + exit.

Conclusion

The “German Problem,” though solved in one sense, is therefore still present in another. Instead of German strength being a problem for Europe, the problem now is the risk of losing it, as the country has become indispensable to the EU.