May 16, 2016
John Redwood’s Latest Blog discusses how Germany leads the EU
One of the reasons so many voters are unimpressed by Mr Cameron’s renegotiation is he did not stand up to Mrs Merkel.
It looks as if he asked her advice and was told to ask for very little. His demands fell far short of the requirements set out in the Bloomberg speech, and did not include gaining control of border policy with the rest of the EU. She then gave him even less than the modest demands he made.
Much of it was presented as the UK negotiating with Germany, just as the Greek crisis is usually presented as Greece negotiating with Germany, and just as the Turkish Agreement and migration arguments are usually led by Germany. Whilst some of this is media simplification, much of it is true. Germany is the lead country by a long way. It is German policy which dominates the economic policies of the Euro area, and German policy which has dominated the border issues. It will be thus, because Germany runs a massive surplus not just with us but with most other countries in the EU and has become the paymaster of the Eurozone.
The problem is German policy is proving damaging and destabilising to much of Europe. Germany’s insistence on austerity policies for the southern and western countries of the Eurozone left them deep in recession for much of the last eight years, and with high unemployment in most places.
It has destroyed the life chances of many young people, leaving as many as half of all young people of working age without a job in the troubled parts of the zone. Germany will not accept the need for larger transfers of money around the zone that are normal in mature single country currency unions, whilst Greece, Portugal, Spain and Italy are unable to make themselves as competitive as Germany and sell enough back to Germany to right the imbalances. They cannot devalue as they used to, and wage cuts so far have not succeeded in removing their deficits as Germany suggests should happen.
German migration policy has sent conflicting signals. First Germany offered a welcome which brought many more migrants into the EU, then Germany bowed to political pressures and proposed a less welcoming policy. Various countries decided to ignore the Schengen rules and impose new fences and walls at their borders, inviting migrants to find new and more dangerous or longer routes into the EU.
It is important to understand Germany’s view of the evolution of the EU. She sees the Euro and the common borders as central features and thinks all countries should join them in due course.She sees these main policies as part of the so called single market, which is much more than a trade arrangement as far as Germany is concerned. Germany believes that if more power over weaker countries is exercised from Brussels they will become stronger and will not need more transfers from German taxpayers.
In the meantime Germany is apprehensive about the Euro 600 bn of accumulated surplus she holds at the ECB matched by the accumulated deficits of Greece, Spain, Italy and Portugal. The Greek part of that is unlikely to be repaid in full and on time, and that could set a bad precedent.
Whilst in more recent months there has been some recovery in Spain, the Eurozone still struggles. None of this is stable. The UK leaving will help, as the last thing the EU needs at the moment is a semi detached member taking attention away from the big issues that the main EU centred on the Euro and Schengen need to tackle. The UK will be a good European if we leave and let them sort it out without the complication of a large non member of parts of the scheme always wanting something different.
I can’t see why we would want to stay in a German led Europe where there have to be bigger transfers to the poorer areas.
Click here to read this piece in John Redwood’s diary