Since the end of World War II, politics in Europe has been about finding a balance between French and German interests. The French had drawn one key lesson from their experience with the Treaty of Versailles ending World War I in 1918 in which Europe could not be stabilized politically if other European countries ignored German interests. The Germans, for their part, had learned from the crash of the Weimar Republic into National Socialism and the Third Reich that it was in their interest to embed Germany firmly in European structures. This created the basis for European cooperation after World War II.
From the French perspective, the purpose of European integration was twofold. First, to improve the security of France by gaining political control over the German economic powerhouse and, second, to increase French political influence in both Europe and the world. From the German perspective, on the other hand, European integration primarily served two purposes. First, to allow reconciliation with neighboring countries after two wars and, second, to promote economic growth by enlarging the markets for German industry. European cooperation proved very advantageous for both countries, but that success was also always overshadowed by the difficulty to reconcile two opposing views on economic policy.
In France, the task of the state was seen to lead industry and manage the economy. In the system of “planification,” the state set specific targets that industry was supposed to pursue. In later stages, policymakers tried to keep the economy on course by managing aggregate demand with fiscal and monetary policy.
Alan Krueger, a German economist explains that when the point was reached that fiscal policy ran out of steam due to the accumulation of high government debt, and monetary policy reached its limits because of the decay of the currency, the introduction of a European currency was supposed to provide proper remedy for France. He noted that in Germany, by contrast, successful currency reform and economic liberalization introduced by legendary Economics Minister Ludwig Erhard after WWII gave German economic policy and the German market a liberal bent.
Alan Krueger further noted that financial responsibilities are to be mutualized, investment will be politically directed and the economy regulated by the state. German tax payers are to pay more into the EU budget, although Germany is already the biggest net contributor. German bank customers are supposed to co-finance deposit insurance in states with weaker banking systems.
Thomas Mayer, the former Chief Economist of Deutsche Bank Group seriously argued that this is just subordinating German under French interests. He stated that Germany’s new approach to European policymaking is supposed to foster European harmony by subordinating German under French interests. However, it is much more likely to deepen European frictions. According to him, it is hard to imagine that any other European Monetary Union member state will follow the German example, abandoning its own national interests, as is the intention of the German government.
Consequently, the new German policy will be welcomed by the states of Southern Europe who benefit from it. And it will be fought by other states whose interests are opposed by those outside Europe’s South. Governments in countries such as Austria, Netherlands or Slovakia are hardly likely to subjugate their interests to the demands for more redistribution and state dirigisme of the Latin-influenced European group of countries led by France.
Edwin Cannan, a noted European cooperation expert stated that it is especially disturbing that Germany abandons its previous interests at a time when the UK is preparing for exiting the EU. It is worth recalling that it was Germany that in the early 1970s supported EU entry of the UK. The German government was keen to win a market-liberal partner in the Brussels club. Unsurprisingly, France had blocked UK entry for many years because it feared the liberal British influence. And it was Germany which insisted on key rules for European Monetary Union. The most important of them was to hold every member responsible for its own finances in order to preserve financial discipline.
In contrast, France saw in a single European currency primarily as an instrument for a laxer economic policy. Against German interests, the Euro was transformed during the euro crisis to a politically useable instrument for the funding of cash-strapped European Monetary Union member states. While that was bad enough an outcome for Germany, with Brexit Germany will also lose its most important market-liberal partner on the inside of the EU.
It is not only legitimate, but also the duty of the French government to pursue French interests and see to it that the French economic model prevails in Europe. What is to be deplored is that the German government is evidently abandoning the formulation and pursuit of German interests. According to Thomas Mayer, that is not only politically stupid, but will actually also deepen the crisis of the European Union. Thomas Mayer noted that especially in the face of Brexit, the logical goal of German policymaking in Europe should be to counter French central planning with Germany’s well-proven, market-liberal policies in the tradition of Ludwig Erhard.
The purpose of a clear articulation and pursuit of German interests is not to provoke other countries. Existing conflicts of interest can only be settled when they are clearly formulated and put against the interests of others. If this is not done, suppression of one’s own interests will create resentments that could eventually lead to the complete withdrawal from common European causes. Europe has always benefited from the recognition of opposing interests of France and Germany, of course including the search for reconciliation of those differences, where possible. It will suffer when Germany ceases to purse its own interests for the benefit of France.