This Blog will feature opinions on European affairs by members of the Centre for European Politics. Comments are welcome in English.

German Election Blog: Luuk Molthof on German European Policy

The German federal election, Europe, and the euro crisis

Luuk Molthof, Researcher, Centre for European Politics

Over the past few years Germany's European policy has been dominated by efforts to manage the crisis in the eurozone. In comparison to its neighbours, Germany has weathered the world financial crisis well and, in economic terms, it is doing better than ever. Since the onset of the euro crisis, Germany has - albeit reluctantly – become the lender of last resort for troubled eurozone economies. Meanwhile, no solution to the crisis appears possible without German consent. Yet Germany's approach towards managing the crisis has not been without criticism. According to Hans Kundnani (2011), Germany has abused its powerful position to impose its economic preferences on the debt-ridden countries, forcing them to adopt harsh austerity measures. Others accuse Germany of inaction and urge Germany to finally assume responsibility for getting Europe through the crisis. Radoslaw Sikorski, foreign minister of Poland, famously remarked in 2011: “I fear German power less than I am beginning to fear German inactivity” (“Sikorski”, 2011). Meanwhile, George Soros (2013) criticises Germany's reluctance to accept the introduction of Eurobonds, calling on Germany either to commit to Eurobonds or to leave the eurozone.

The upcoming federal election has raised expectations of a change in Germany's euro policy. However, the chance that, after the elections, Germany will adopt a significantly different approach towards managing the crisis is slim.

In debating the possible outcomes of the election, most commentators discuss three possible scenarios; first, a continuation of the current CDU/CSU-FDP coalition; second, a grand coalition between the CDU/CSU and the SPD; and third, a red-green coalition between the SPD and the Greens. It is generally agreed that if the existing coalition stays in power, Germany's approach towards managing the crisis in the eurozone is unlikely to significantly change. (Matthews, 2013). According to Dullien and Guerot (2012), the economic thinking of the CDU, the CSU, and the FDP has been heavily informed by the ordoliberal tradition. A black-yellow coalition is therefore expected to continue to 'prescribe' austerity policies for ailing eurozone economies, to continue to resist the introduction of Eurobonds, and to continue to oppose the idea of the ECB as a lender of last resort (Dullien and Guerot, 2012; Matthews, 2013). If, however, a grand coalition is formed between the CDU/CSU and the SPD, a change in policy direction is deemed more likely. Nevertheless, the chances for a significant change should not be overstated. While the SPD has publicly supported the introduction of Eurobonds, the party is opposed to ECB bond purchases. Moreover, although committed to rescue packages for ailing eurozone economies, the SPD, in line with the approach taken by the current government, insists on austerity measures in return for financial support (Dullien and Guerot, 2012; Münchau, 2012). A more significant policy change is to be expected when a red-green government is formed between the SPD and the Greens. The Greens are strongly in favour of the introduction of Eurobonds and believe that the adjustment of current account imbalances must not only come from deficit countries but must also come from surplus countries such as Germany (Dullien & Guerot, 2012, p.8). However, the formation of a red-green government is, as it stands now, the least likely scenario of the three scenarios discussed (Ed Turner, 2013). Thus, the chance that, after the election, Germany will adopt a significantly different euro policy is slim.

Because of the euro crisis, and because of Germany's central role in managing it, the German federal election attracts considerable regional and international attention. Yet, ironically, both Europe and the euro crisis play only a minor role in the election campaigns of the German parties – with the notable exception of the election campaign of the new anti euro party, Alternative für Deutschland. With the German economy running smoothly there's been little incentive for either the government parties or the opposition parties to make the unpopular euro crisis a prime topic in the election (Scally, 2013; “Greek bailout talk inserts euro crisis into German vote”, 2013)1. However, there is little doubt that, after the elections, the euro crisis will again be a prime issue soon enough.

Notes:

1 Although Finance Minister Wolfgang Schäuble's recent remark that Greece will likely need another rescue package has stirred up the debate about Germany's role in managing the euro crisis.

References

Dullien, S. & Guerot, U. (2012). The long shadow of ordoliberalism: Germany's approach to the Euro crisis (ECFR Policy Brief 49). Retrieved August 24, 2013, from: http://ecfr.eu/content/entry/the_long_shadow_of_ordoliberalism_germanys_approach _to_the_euro_crisis

Greek bailout talk inserts euro crisis into German vote, gives Merkel opponents ammunition (2013, August 22). The Times Colonist [online]. Retrieved August 24, 2013, from: http://www.timescolonist.com/business/greek-bailout-talk-inserts-euro-crisis-into- german-vote-gives-merkel-opponents-ammunition-1.597426

Kundnani, H. (2011). Germany as Geo-economic Power. The Washington Quarterly, 34 (3), 31-45.

Matthews, A. (2013, June 24). Five more years? Merkel’s election pledge key for Europe. CNBC [online]. Retrieved August 24, 2013, from: http://www.cnbc.com/id/100838567

Münchau, W. (2012, December 2). Merkel’s opponents offer too much consensus. Financial Times [online]. Retrieved August 28, 2013, from: http://www.ft.com/intl/cms/s/0/32d6ba56-3a22-11e2-baac-00144feabdc0.html

Scally, D. (2013, August 23). German election: Don't mention the euro crisis. The Irish Times [online]. Retrieved August 24, 2013, from: http://www.irishtimes.com/business/economy/europe/german-election-don-t-mention- the-euro-crisis-1.1502612

Sikorski: German inaction scarier than Germans in action (2011, November 29). The Economist. Retrieved August 24, 2013, from: http://www.economist.com/blogs/easternapproaches/2011/11/polands-appeal-germany

Soros, G. (2013, April 10). Investor George Soros: Germany must accept Eurobonds or leave Euro. Spiegel online. Retrieved August 24, 2013, from: http://www.spiegel.de/international/europe/george-soros-says-germany-must-accept-

eurobonds-or-leave-euro-zone-a-893630.html

Turner, E. (2013). Looking forward to the German elections – a tale of three paradoxes. Retrieved August 24, 2013, from the Foreign Policy Centre website: http://fpc.org.uk/articles/606

 

Posted on Tuesday, September 3, 2013 at 05:01PM by Registered CommenterDr Alister Miskimmon | CommentsPost a Comment

Giacomo Benedetto on BBC Radio 4

Dr Giacomo Bendetto appeared on BBC Radio 4's You and Yours today. The programme is available here: http://www.bbc.co.uk/programmes/b01sdg30 

Posted on Tuesday, May 14, 2013 at 03:30PM by Registered CommenterDr Alister Miskimmon | Comments2 Comments

EU budget: what is the UK’s cost and benefit from the Common Agricultural Policy?

The latest budget figures are for 2011 (Jan - Dec 2011). The 2012 figures have not yet been calculated.

In 2011, the UK contributed 11,273 million euro to the entire EU budget. Britain got back spending of 6,570 million euro, so that the British net contribution was 4,703 million euro. Looking at the whole budget, the UK received 6,570 out of 117,337 million (or 5.6% of total spending)

CAP spending in the UK in 2011 was 3,315 million euro. In the whole of the EU, CAP spending was 42,493 million euro, so the UK took 7.8% of the share of CAP spending. The UK therefore does a bit better than average for the CAP, gaining 7.8% of CAP spending compared to 5.6% of overall spending.

How much does the UK put in and how much does it get back? In 2011, the CAP was 42,493 million out of 117,337 million and represented 36.2% of EU spending. 36.2% of the UK gross contribution is  4,082 million euro. CAP spending in the UK (as mentioned above) was 3,315 million euro. So what we have is this:

EU budget 2011
UK contribution to CAP: 4.082 billion euro
UK receives from CAP: 3.315 billion euro
UK net contribution to CAP: 767 million euro
Divide the above figures by about 60 million and you have the average amount per person in the UK!

Of course, the new budget (which will be approved or rejected by the European Parliament tomorrow) changes these figures a bit. Exactly how much CAP will cost in the future and its costs or benefits for Britain are difficult to foresee. First, the new budget is cut by 5% overall, which means that the UK contribution goes down by 5% but so do receipts. Overall, CAP spending will go down by 20% and will be spread more evenly in favour of new member states from Eastern Europe. Although the UK contribution will be reduced by 5%, the UK benefit from the CAP will fall by well over 20% so in net terms of agriculture the UK will be worse off.




Posted on Tuesday, March 12, 2013 at 05:21PM by Registered CommenterDr Giacomo Benedetto | CommentsPost a Comment

The collapse of the youth vote for Berlusconi and the Left in Italy

Click here for a paper by Giacomo Benedetto on the collapse of the youth vote for Berluscnoni and the Left in Italy. The Italian centre-left came away from the elections of February 2013 with just 3% of the votes among 18-24 year olds. 46% of the same group gave their votes to Beppe Grillo's Five Star Movement.

 

Posted on Sunday, March 3, 2013 at 12:25PM by Registered CommenterDr Giacomo Benedetto | CommentsPost a Comment

Understanding the EU Budget Deal

Click here for a paper by the CEP's Giacomo Benedetto on the multiannual budget agreement reached by the EU governments on 8 February.

 

Posted on Friday, February 15, 2013 at 12:21PM by Registered CommenterDr Giacomo Benedetto | CommentsPost a Comment