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The Germany-UK axis and the long-awaited rescue of Europe

The long awaited rescue of Europe, along with its badly put together single currency, gets under way now that the German chancellor no longer has the distraction of an election to worry about.

Camerkel

Angela Merkel aspires to a business-minded Europe

Angela Merkel, the pastor’s daughter from the former Communist east, will get down to a lot of serious business. Her mission, no less, is to save the continent from imploding. In doing this she will seek help from her new best friend, David Cameron. Many of us here at home have gone off him, particularly the women, but he makes a good impression abroad. Even neo socialist Barack Obama gets on well with the ‘posh boy’ from Chipping Norton. He is mannerly, brimming with self-confidence and knows how to talk the talk. What else would one expect from an Old Etonian, that breed of Brits who once believed that they were born to rule. Incredibly, it seems that even in 21st century Britain they still have grounds to believe this.

Angela Merkel aspires to a business-minded Europe: caring but frugal; hard working, but at ease with itself. The last thing she wants is a Europe in tatters. Whether or not it was wise to create the euro in the form they did, we have to accept it is a fact of life. It certainly has benefitted German exporters, whose massive sales to the rest of Europe is part of the reason they are in such debt. If Germany were to go back to the deutschmark its exports would be so incredibly expensive that their export dependent economy would be in danger of crashing. So save the euro they must. But they must also save it for another reason: if it collapses, or even fragments, the whole European Project will as likely as not come off the rails and Germany will take the blame. For the third time in a century, people will say Germany has left Europe in ruins.

The simple truth is that the political and financial establishment have too much at stake to allow their dream project to collapse. The consequences would be seismic and coming at this time, when recovery seems underway, it would be unthinkable. Only Germany has the financial clout to save the Euro.

But Fritz does not want to open up his coffers – especially to what he perceives as lazy and corrupt southerners – but neither does he want to become Europe’s baddy all over again. He will drive a hard bargain which will involve some pretty nasty medicine when he takes responsibility for all that toxic debt and he will seek a powerful, respectable ally to share the howls of protest with. France is no longer willing to be that ally. She seems not to understand the scale of the problem. Perhaps that’s because she is herself part of the problem. That leaves only one ally available to Germany and it is not even in the euro. That ally is us.

Germany views Britain as a business-minded country, like herself, and it makes sense, in her view, to get Britain onside in her chancellor’s drive for reform because Cameron wants reform too. But his reform is not just in monetary matters. As it happens, Germany, as well as others, doesn’t much like a lot of what is coming out of Brussels so he could find himself pushing at an open door.

I am convinced Germany will do all that it can, within reason, to give Cameron what he needs from Europe rather than lose a necessary and valued ally. Merkel is said to be ready to discuss anything, so long as Cameron does not ask her to chose between Britain and Europe. She knows that if he cannot repatriate powers then Britain is a goner from the EU. That would be a body blow to the whole European Project and it would set a most unwelcome precedent. It would send shock waves throughout Europe and indeed the world.

Even before her re-election, when she had to be careful, she began her courtship of David Cameron. That weekend soiree to her country home in which Samantha and the kids were invited, was in my view, extraordinary. It spoke volumes. She has never asked any other political leader to visit her at home, never mind bringing the whole family. So even if the women on Dave’s home patch have abandoned him in droves, Angela most certainly has not. She thinks he’s lovely – ‘My naughty nephew’, she calls him, and can’t wait to team up with him in sorting out Europe. In all the photo shoots of recent times she makes a point of standing next to him, and the body language is very telling.

All in all, it causes me to think that we are in the early stages of seeing a new, powerful axis being formed…  a resurgent Britain alongside its fellow Teutonic  power Germany. That axis will be an outward-looking one keen to harness the enormous potential of half a billion Europeans, but moving to direct their energies to the world beyond Europe. Britain, for its part, is already travelling very successfully down that road and with its vast connections worldwide, its goodwill from its former empire and its universal language, it is peculiarly well placed to profit from it all.

Uncle Sam worries about the threat posed by the emergent Eastern economies – we all do – but he does not worry about Europe. Rather he wants to team up with it in a North Atlantic trade partnership. Such a partnership is a very real prospect; it will hugely benefit all of us and give the whole world a tremendous fillip.

I do not subscribe to the view that this century will necessarily be the Asian century. Yes, it will do well, but all the countries concerned have tremendous structural and political problems which the West overcame long ago. Endemic corruption and a lack of trustworthy institutions will also act as a break. Human Rights issues will plague them because justice, as we know it, does not exist. They have got a lot of work to do and are not in a position to give their undivided attention to coining a buck, as the West is. For a start, they are going to have to take better care of their people and that means creating something of a welfare state – and we know how ruinously expensive that will be.

As for Cameron, he has a great opportunity, but if he does not put forward some female friendly policies and quickly, he won’t be there after the election to take advantage.

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A shift of power in EU corridors

It seems clear to me that a major link-up between the two top Teutonic powers of Europe – Britain and Germany – along with lesser like-minded powers to the north and east is taking place. The tectonic plates of Europe are on the move in a way that may prove irreversible. This will certainly be viewed with horror in Paris.

Merkel's whole philosophy of life gels with that of the foreign leader she is said to have once described as her 'naughty, but charming nephew'.

Merkel’s whole philosophy of life gels with that of the foreign leader she is said to have once described as her “naughty, but charming, nephew”.

That invitation from Angela Merkel for David Cameron to come and visit her at her home north of Berlin a few weeks ago and to bring his wife and children has, I believe, great implications. She even wheeled out her hermit husband for the weekend soiree.

It had all the characteristics of a love-in. No other European leader has had such an invitation or been accorded such warmth and hospitality. It is known that the pastor’s daughter holds Cameron in the highest esteem – perhaps that Eton grooming helps – and it will have been reinforced, I’m sure, by the shy, but charming, Sam Cam – and her equally delightful children. Such personal chemistry and bonhomie really does matter. The invite, in my opinion, speaks volumes.

But equally importantly  her whole philosophy of life gels with that of the foreign leader she is said to have once described as her “naughty, but charming, nephew”. Naughty because, at a time of huge difficulty for her beloved Euro Project, he has rocked the boat by demanding fundamental changes to the way the EU goes about its business.

It is not as if she disagrees with much of what he committed to put before the British people in a 2017 Referendum, should he retain power, but because it’s complicated and will take a lot of what she does not have: time. As it happens, most of her fellow countrymen agree with David Cameron. They, too, dislike much of what is coming out of Brussels and would like to see things done differently. But she wants to keep her eye on the Euro ball, whose solution – if there is one – is also complicated. She feels she cannot afford the distraction of a major renegotiation of EU treaties at this time. There is also the added factor that she is up for re-election in September and has all that circus ballyhoo to worry about. Cool and detached, as Angela famously is, she is in danger of becoming stressed and Davy boy, right now, isn’t helping.

What with France’s weak and hopelessly left-leaning ‘leader’ – distracted as he is with woman problems and who cannot see the necessity for tough measures in France – she is at her wits’ end. The Franco-German axis, which has been the engine of the EU since its beginning, is unravelling.

France, under Hollande, seems destined to be the flag-bearer of a southern rim of EU countries which will put up with no more belt-tightening. Merkel admires little Ireland’s heroic acceptance of the need to pay off its debts, but she is fast losing patience with the other PIGS (Portugal, Greece and Spain, that is). She is full of praise for Cameron’s recognition that sound money and balancing the books is central to everything. Also his open trading outlook and market philosophy equates exactly with her own. She has no truck with spending your way out of debt. She sees David Cameron as an economic soul mate.

Germany herself has still not shaken off the terrible legacy of WWII and she is unwilling to take the lead in Europe on her own for fear of cries of a Fourth Reich being hurled about. She feels she has to have a partner who is ‘respectable’ and can front up everything diplomatically while she can make the running economically. France, for fifty years, has been that partner. Yet now the dice have rolled in another direction and an alignment of Teutonic powers seems in the offing. Is this a good thing? It certainly will not seem so in Paris, which will be outraged at its relegation and see the hand of perfidious Albion at work all over again. As virtually the creator of the EU, which she saw primarily as a means of controlling German ambitions, she has seen her dominance slide inexorably. That is why, originally, she was so keen to keep ‘interfering’ Britain out. But this proved impossible in the end, especially when you had a British leader, in Edward Heath, who was prepared to sell the pass and demean himself as a wretched supplicant, to get in.

Now, more and more countries have been allowed to join the original Club of Six – chiefly at the instigation of Britain – and France’s position has weakened with each new entrant. Most infuriating of all, they seem to want to use English in preference to French in the corridors of Brussels power! Once you could not get a job anywhere – even a lowly one – if you were not fluent in French, but now the point had been reached in which the Brussels power brokers actually had the audacity to appoint a Union foreign minister who spoke no other language but English. That was the ultimate insult.

I have no doubt that Europe has the capability to become the dominant power in the world if only it can get its act together. Its GDP is already way ahead of Uncle Sam’s and it will only widen. In terms of any numbers you care to look at, it is perfectly within its reach to see off competition from the east for the rest of this century. I look to the day when Russia itself comes knocking at the EU door. It is essentially a European country.

Europe’s cultural dominance is already unassailable: its music; its art; its literature; its universities; its history; its multiplicity of matchless ancient cities. Even its science is on a par with the US. I see no reason for us to be downcast. All things come to an end, including this wretched recession.

So will David Cameron get his deal, which will persuade enough Britons to back him in the referendum? I think he will. Angela will see to that, one way or another, and she will be assisted by Britain’s many other friends in Europe. France will be incandescent. Germany does not wish to lose a country which she sees as pivotal to Europe’s future; one that has played so crucial a role in its past. America will be delighted, for she will feel that in the coming difficult world, where after 500 years a resurgent east threatens to displace a weary west, a half a billion people, all speaking its own language – as a back up – and mentored by his closest ally and friend, will be there to stiffen its own resolve. And that same Europe may well be a Europe fashioned after the Anglo Saxon model – one very much to the US liking. Rest assured, too, that Uncle Sam himself is far from finished. He will come bouncing back, I am sure, with all that energy we are so familiar with. Together with Europe, it will be a bloc more than capable of looking after itself in a fast-changing world.

A Marshall Plan for PIGS

I recently watched a BBC interview with Angela Merkel, the German Chancellor – a very rare event since she has only once before given an interview to the foreign media.

The interview represented a considerable feather in the cap of the BBC, further confirming its status as the world’s premier broadcaster.

The interviewer, Newsnight’s Gavin Esler, wanted to get inside the head of the person who will largely determine the future of the eurozone and, to some degree, the rest of the world.

The visual aspect of TV makes it very difficult for an interviewee to ‘fake it’; to pass himself off as someone else. His body language and emotions are often plain to see; and when his face occupies most of a 42″ screen in your living room, you feel you can almost look into his soul. TV greatly assists in our quest to sort out the wheat from the chav.

Merkel came over as a pleasant, but no-nonsense, woman – interested more in getting the job done than in sound bites. Astute as she was with thoughtful responses, she seemed genuine.

And there was more than a little guile there too (but you don’t get to lead the most powerful economy in Europe without a level of that).

It was not difficult to understand why she had taken a shine to our own prime minister – the polished, well-mannered product of England’s leading public school. She may even have fancied the younger man a little, or perhaps felt a tad motherly, seeing him as the archetypal English gentleman as opposed to the coarse, bling-loving French president who wants to smother her at every opportunity with Gallic kisses. The contrast is stark.

Cameron is a most courtly emissary from a fellow Teutonic power which, from early childhood, she had come to respect. Yet despite its bombing of large areas of her beloved homeland almost back to the Stone Age only a generation or two before, it is apparent that – in economic terms at least – Merkel regards Britain as a natural ally and one she is most unwilling either to offend or marginalise.

The BBC was right in picking Gavin Esler as the interviewer, since Paxo might have been too adversarial by adopting his characteristic ‘master inquisitor’ approach.

But what I really gleaned from the interview is an appreciation of the lengths to which Germany will go to save the single currency.

Up to now, Angela Merkel has, understandably, played hardball. The German taxpayer is not going to throw his money at profligate nations which show an unsatisfactory willingness to change their ways.

The Germans want a new economic order in Europe so that nations act responsibly in the future; and to this end they want robust systems in place in the form of a fiscal union.

Germany is not interested in imposing a German jackboot, but wants the whole exercise to be seen as a pan-European affair – even though a fiscal union would result in all 17 eurozone nations’ budgets being overseen by EU officials: a fact masked by a Byzantium-level of cunningness or ingenuity (call it what you will).

I came away from that interview convinced that the German political elite do not want a single member – not even Greece – to drop out of the eurozone. And when push comes to shove, they will do everything in their power to see that this does not happen. They see the loss of a single country as the trigger that will begin the unravelling of the entire single currency and, more than that, of the whole ‘European Project’ to which it is so utterly and irredeemably committed.

So now, it would seem, it is down to the individual eurozone member states to do what is necessary. Only time will tell whether the eurozone’s peripheral countries’ impoverished citizens will – or even can – stay the course.

Pain levels in Greece – and now, more alarmingly, Spain – are at breaking point. A pistol shot to the head outside the Greek Parliament of a 77-year-old retired pharmacist has a terrible resonance with that pistol shot long ago at Sarajevo which set in motion the chain of events which led to the First World War.

Germany has to understand that PIGS’ (Portugal, Italy, Greece and Spain) citizens can take little more pain. While it was necessary to start the austerity drive and change PIGS’ spending habits, it is clear that austerity alone is fast becoming counter-productive.

If Germany wishes them to hold on, she must give them hope – and this can only mean a plan not just for cuts, but for growth. She must put together and spearhead a new Marshall Plan of aid – such as saved Europe in the aftermath of the Second World War.

Germany does not wish to be cast as the villain all over again; the one who did wrong by Europe for a third time, only now by economic, rather than military, might.

Now that we have all come to understand that we must stop living beyond our means, and that the social model we have developed is unsustainable, we are in a position to go forward.

Only by means of growth and a smaller state sector have we a chance of paying down our debt.

Fearful and envious as we may be of the developing countries – and that includes the oil producers – they are as one in wanting us to succeed; for if we go down the pan, we are as likely as not to drag them down with us – and they know this.

They might even feel that it is in their interest to involve themselves in such a rescue plan. But they will not do so if they see north Europe, and in particular the Germans, sitting on a pot of gold but refusing to use it to kick start their own salvation.

God, as they say, helps those who help themselves.

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