Europe in crisis: Germany is shifting gears and re-tooling
In Much-Twaddle-in-the Marsh, the talk these days, when it isn’t about Liz Truss as the UK’s lost leader, is about the imminent collapse of the European Union. Those pressing the case do so with lip-smacking relish. Nothing would please them more than to see “Europe” sink beneath the waves as the goodship Royal Sovereign prepares to drop anchor somewhere between Singapore and Perth.
Each of the claims made has some basis in fact, which is what makes them superficially believable. But they are exaggerated in the manner of a political cartoon. The first is that Germany has totally lost the run of itself and is about to become the Sick Man of Europe. The second is that France has become ungovernable. The belief that mass immigration is rapidly turning Europe into a demographic colony of North and sub-Saharan Africa is claim number three, while, as icing on the cake, the contention is that in the midst of the Ukraine war “Europe,” as distinct from Nato, has been about as much use as a chocolate teapot.
Have I left something out? Well, perhaps that Commission President Ursula von der Leyen and her anonymous, “unelected” colleagues are hopelessly out of their depth, not just on Ukraine but on just about everything else. The euro as a rival to the dollar? A green Europe by 2030? The citizens of the 27 persuaded that Brussels knows how to stop the small boats crossing the Mediterranean? Ho-ho-ho … don’t make us laugh!
Of the four critiques, the most novel is the first – the unprecedented loss of faith in the power of Germany, which is our topic for today. No one could deny that these are tough times for the EU’s dominant economy. Germany makes things and it makes them well – not just cars (BMW, Mercedes, Audi, VW), but machinery and tools (Siemens, Bosch, BASF), pharmaceuticals (Bayer, Merck, BASF again), shipbuilding and marine engines (Thyssen-Krupp, Meyer Werft, Blohm & Voss) to say nothing of chemicals, metals, cement, sportswear (Adidas) and – let us never forget – beer.
German manufacturing is awash with big names. What they have in common is that, having long been on top, they have a long way to fall. With the world struggling to avoid recession and with energy prices in the stratosphere, demand for German goods has fallen sharply while production costs have soared. High interest rates and inflation: cause and effect. But does anyone doubt that when the global upswing comes – which it will – Germany will not take early advantage and fight for its place at or near the top of the rankings?
When the world is no longer interested in cars, trucks, white goods, machine tools, medicines and steel – that is when Germany will give up and declare bankruptcy: not before.
More serious in terms of Berlin’s place in the firmament is the fact that its political system has been knocked sideways by the emergence in depth of the Far Right in the shape of the AfD (Alternative für Deutschland), focused as it is on immigration, “traditional” values and a rejection of rapid progress towards the goal of Net Zero.
The balance of power, already complicated by a slackening in support for the Greens, has been made worse by the failure of both of the two big parties, the conservative CDU, and the centre-left SPD, to produce inspiring leaders. They used to do so on a production-line basis (Konrad Adenauer, Ludwig Erhard, Willy Brandt, Helmut Schmidt, Helmut Kohl). But starting with the late-period Angela Merkel, followed by the weak and unimaginative Olaf Scholz, the conveyor belt has stuttered and come to a halt. Cometh the hour, cometh the ordinary has been the case for at least the last five years, and so far no one new has appeared to restore the Old Order to anything like its former self.
But that, too, will pass. The risk is that the AfD, surfing a nationalist wave, will make it into government next time round, allied perhaps with Bavaria’s CSU and the Free Democrats, though not with the CDU. The greater likelihood is that a strong leader from the centre will push through to keep the country focused on wealth creation. Immigration will play an important role whatever happens. The hope has to be that someone, somewhere will come up with something to hold back the tide. But should this prove not to be the case, then not just Germany but the whole of Europe, including the UK, faces an uncertain future.
Ever since the early days of the Wirtschaftswunder, when the post-war federal republic, bolstered by Marshall Aid, began to rebuild its industrial capacity, Germany has proved itself cautiously outward-looking. The pervasive feeling that the nation should remain homogenous was overcome by the needs of high-density industrial production. Agreements were signed to attract labour from elsewhere in Europe, most obviously Italy, Greece, Portugal and Spain, while the door to the Communist East Bloc was always ajar. Later, in the 1960s, more than a million Turks arrived as gastarbeiter, though it was only relatively recently that these and their descendants were granted citizenship.
Then, in 2015, with the Middle East ablaze, Chancellor Merkel extended an invitation to some half a million Iraqi, Syrian and Afghan asylum-seekers, a majority of whom were in fact no more than economic migrants. In part, this was a humanitarian gesture, but it was also in response to the nation’s falling population. What quickly became clear was that the new arrivals – almost all of them Muslim – were not universally welcome. Resentment rooted in racism combined with a growing fear of Islamism. Eight years on, the racism has subsided, but the frustration of German workers and families living through hard economic times while newcomers with a different culture and religion take up jobs, school places and hospital beds, often leapfrogging the lines for public housing, has left its mark. It is at the intersection of economic difficulty and the growing numbers of “alien” workers that the AfD has found its strongest support.
It is impossible to know how the various developments will play out over the next five to ten years. Support for Fortress Europe is growing, but the fact is that, short of a takeover of the means of production by AI, the economy cannot function at full capacity without a continuing influx of workers. All that can be said with certainty is that the country is going through a painful readjustment. A rightwards shift in attitude by voters has not been helped by the widespread perception that the industrial and corporate élite, long noted for its close collaboration with the unions, has discovered that labour, even at the highest levels, can be found more cheaply in countries beyond Germany’s borders.
But if the workers are affronted, they, too, look abroad these days in search of a bargain. As in France and the UK, the shops are full of goods from China, South Korea and Vietnam. Poland has at the same time become the go-to place for everyday materials that were once a domestic preserve. Online, this phenomenon is even more pronounced.
Does this mean game over? Far from it. Germany is not about to follow the example of Brünnhilde in the Ring Cycle, closing the gates of death around her. The great machine that encompasses the Ruhrgebiet, Bavaria, Stuttgart, Berlin and Leipzig is re-tooling. The reliance on oil and gas from Russia (a blindspot in Merkel’s vision of the future that her biographers will link to her upbringing in the GDR) has given way to secure contracts with Norway, the Netherlands, France and the US. At the same time, investment in electronics and the digital economy, including artificial intelligence, have joined engineering on the new industrial agenda. Young Germans today don’t look to the lathe and the assembly line as the primary bringers of prosperity, but to information and communication technology, sustainable energy and the rapidly-evolving service sector.
Jump ahead ten years, with the Ukraine crisis resolved and the green revolution in full swing and it is hard not to see Germany at or near the forefront of what will be happening in Europe’s evolved economy.
In considering the future of the EU, this leaves the alleged ungovernability of France, the threat posed by mass immigration and the below-par performance of the current European Commission, with space, too, for the triumph of the will that is twenty-first-century Poland. We will return to each of these in challenging the false claim that “Europe” is on its last legs. In the meantime, be in no doubt that the central role of Germany in determining the continent’s future is very far from over.
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