Debt. Unemployment. Banking. Refugees. The list of words that preface “crisis” in Europe could go on for days. While some radical political groups that blame their respective countries’ problems on the institutions of Europe stealing their sovereignty have gained more of an audience, it is highly unlikely that integration in Europe is too strong. Rather, the European Union (EU) and its fellow institutions are too weak. Perversely, Germany is preventing their strengthening. By that measure alone, the EU is close to failure. The EU has its origins in the aftermath of World War II. It was created as supranational authority governing a common market—to serve as check on Germany. After two world wars blamed on Germany, the institution would control the regional market for goods that were essential to the war effort, thus preventing the unilateral rise of Germany and its military.
Fast forward to present day and we see a Europe where Germany’s dominance is unquestioned. The institution that was created as a means of European solidarity and a check on Germany has taken a back seat. Germany, the economic and political powerhouse of Europe, knows the EU needs it to remain a member to have any authority, and thus Germany has de facto veto power over any efforts at further integration. Sometimes Germany will “compromise” by offering its own plan for greater European solidarity. These plans of further integration, however, represent a convergence of rules to Germany’s standards, rather than a convergence of standard of living.
While the United States is beginning to return to a booming economy, Europe continues to struggle. While Germany’s fiscal discipline and high savings left it relatively better off in the aftermath of the recession, it has used its status as means to further embolden its regional power and prevent many sensible recovery mechanisms from being installed and benefiting other European countries.
In the wake of the Great Recession, the U.S. government tripled the amount of savings that was insured by the federal government—meaning, even if your bank of choice failed, you wouldn’t lose your money. This helped avoid the rush of everyone to the bank to make a withdrawal—which would fail it. Meanwhile, in Europe, Germany has thus far prevented the possible introduction of a European-wide banking union with deposits insured by Europe as a whole. Given this, the crisis meant people were much more likely to pull deposits out of banks in the more affected countries (i.e. Greece), further exaggerating their crisis. Also, the U.S. has fiscal transfers which allow federal taxes raised in one state to be spent in another, an example of which is unemployment taxes.
Germany has also opposed measures to create an effective fiscal union in Europe (they wouldn’t dare let another cent of their taxes get spent on Greece). On top of this, while the rest of Europe is trying to move away from further regulation on the financial sector and toward measures that create economic growth, Germany is pushing for a tax on financial transactions in Europe—which would impede the efficiency with which investors’ money could get to those who need to borrow. In the absence of these reforms, as Greece’s crisis continued to heighten over the summer, Germany’s finance minister called for Greece to receive a “timeout” from its member status in the group of countries with the euro as their currency.
Now, as Germany expects over a million refugees from Syria, Iraq and other troubled regions to seek asylum in Germany this year, it is calling on its European neighbors to share the burden. Other countries of Europe should use this time as opportunity to shame Germany into accepting that the success of Europe and the euro depend on shared costs, not on simply shifting costs onto those with differing policy views. That being said, let’s hope the refugee crisis is contained as to avoid German military involvement in Syria and elsewhere. While their assistance would likely help the U.S., the future of Europe with a domestic polity in Germany—which already thinks it’s better than its poorer neighbors—that is reminded of its military capability by a success on the global stage in the Middle East is a Europe that will continue to fall into crises and will see its institutions along with its solidarity completely eroded.
Steven Kelly is a junior majoring in corporate finance and political science. Send all comments, questions and concerns to opinion@dailycardinal.com.
