27 november 2011, merkozy

I wrote my second-ever new europe column on germany, and seven years ago it was quite insightful to flag that "everything about the eu rests on germany". Then, it was still understated: no-one coined the "kohl consensus". Gerhard shroeder ended that culture of restraint, bringing a rather more muscular germany, its capital now berlin, its whole economy yoked to the deep sacrifice of rebuilding east germany, which brought lower wages and sent jobs abroad, lowering germany's unit labour costs by some 20%, one of the causes of the euro's current problems (15 october 2011). It also brought angela merkel to power. And in that time too it turned around its trade: in 1999 german exports to portugal, ireland, spain and greece were €30bn, 5x the €6bn to china; by 2010, it exported €53bn to china, more than the pigs combined. Now germany is bigger and better by quite a way than anyone else, especially france, which has lost the battle central to its whole european policy of maintaining parity with germany. Having built the eu and played its first decades brilliantly, france has long since seen it slip beyond control, the main reason for the 2005 "no" referendum vote. Competition, english and new member states were not made in paris. Whilst brussels was built on the french civil service model, the newer ecb is thoroughly bundesbank. Thus, as the economist said (excellent article), france needs germany now because it's so weak, and germany needs france because it is so strong. Merkozy, despite the fact that they really don't like each other, very much has the wheel of the 17, and by default the 27, even if the new italian premier was ceremoniously invited along to the last "g2" summit. Behind that though, it is clearer than ever that it is germany more than ever that is the new european superpower, finally no longer economic giant but political dwarf. That mantle instead seems to have been inherited by europe itself.