Every major financial crisis has geopolitical consequences. The financial crises of the 1980s and 1990s in Latin America resulted in the emergence of Brazil as the dominant regional power, overtaking decisively other competitors like Mexico, Chile and Argentina. The Asian financial crisis contributed to the dominance of China over East and South-east Asia. The European fiscal and debt crisis has contributed to the consolidation of Germany’s power within Europe.
At the end of a long tunnel of painful political negotiations within Europe, the light of debt relief is powered by the German economy. However, a Germany that remains wary of asserting its political personality within Europe, as Japan has been in Asia, has firmly clasped the hand of France to form a Franco-German alliance providing political leadership to a distraught Europe.
German diplomats the world over are insisting that it is the “dual” leadership of French President Nicolas Sarkozy and German Chancellor Angela Merkel that is working together to provide relief to the distressed European economies. When the ambassadors of Germany and France chose to brief a few editors in New Delhi earlier this year about their joint leadership in Europe, the meeting took place in the German ambassador’s house.
With France itself in a fiscal and financial bind, it is not particularly averse to this warm German hug and so has chosen to be in step with the more economically robust and self-assured Germany. While President Sarkozy exudes French charm in the company of other heads of state, in the company of the matronly German chancellor he behaves more like an obedient schoolboy!
Germany’s hesitation in offering more assertive political leadership within Europe is understandable. The fact, however, remains that it has been more successful in consolidating its power in its own neighbourhood than Japan has been in Asia.
Today Germany is to Europe what China has become to East and South-east Asia. Both China and Germany are at once exporting as well as importing powers. They export to the world but import largely from their neighbours. This is the geoeconomic foundation of their power in a globally integrated world.
The only difference, and an important one, is that China has been increasingly unabashed in asserting its military power. Germany continues to shy away from doing so, given the burden of memory that still haunts the so-called “axis” powers of the last century.
Indeed, when France and Britain launched their offensive in Libya, Germany stood with Brazil, India and South Africa, fellow aspirants for United Nations Security Council membership, to abstain from voting for a UN resolution authorising a no-fly zone over Libya and stay away from military action.
Germany has consciously opted to project its power only within its own hinterland, as it did in the Balkans, ensuring that it emerges as the unquestioned leader of continental Europe. Beyond its own neighbourhood Germany remains a reluctant military power, but an aggressive economic power.
Given its industrial and technological leadership within Europe and its fiscal and financial strength, Germany has dealt with a changing world with greater self-assuredness than other European nations that have been unnerved both by the forces of globalisation and Asian competitiveness and by their domestic political inability to deal with fiscal and financial challenges.
As Ulrike Geurot, an analyst at the European Council on Foreign Affairs, puts it, “A European Germany is going global with or without its fellow Europeans... The huge transition that is occurring is that Germany (or more precisely, the German role in and for Europe) is shifting from geopolitics to geo-economics” (available at: www.alexanderbon.com/2011/06/people-power-germany-greece-and-the-euro/).
What has helped Germany march ahead of its European neighbours is its ability to retain its share of world trade, shifting quickly to emerging markets, especially China. By exporting to the emerging markets, while importing from its neighbours, Germany has mimicked China’s strategy of exporting to the developed economies while importing from its neighbours. This, in brief, is the geo-economics of German geopolitics today.
“Business has exerted significant influence on key elements of German foreign policy,” says Hans Kundnani in a fascinating essay titled “Germany as a Geo-economic Power”. According to Mr Kundnani, “Energy companies like E.ON Ruhrgas have influenced policy towards Russia; auto makers such as BMW have influenced policy towards China; and manufacturers of technology and machinery such as Siemens have influenced policy towards Iran... The concept of geo-economics now seems particularly helpful as a way of describing the foreign policy of Germany, which has become more willing to impose its economic preferences on others within the European Union in the context of a discourse of zero-sum competition between the fiscally responsible and the fiscally irresponsible” (The Washington Quarterly, Summer 2011).
Thus, rather than accept a reflationary fiscal policy in the euro zone as the price of growth and employment generation, export-sensitive Germany insisted on austerity throughout the euro zone, undermining growth in the “periphery” and even threatening European unity, to ensure that it remains globally competitive. This mirrors China’s “beggar-thy-neighbour” strategy of the 1990s within Asia of retaining its export competitiveness at the cost of its neighbours.
Kudnani believes that “in the future, we can expect Germany to be increasingly willing to take decisions independently of – and sometimes in opposition to – its allies and partners, as it did during the Libya crisis. It is likely to pursue its national interests – defined above all else in economic terms – more assertively than it used to, while being more reluctant to transfer sovereignty to multilateral institutions”.
In bringing Germany to this point, after months of lying low and appearing at times confused, at times fussy, and at times a nit-picking and miserly aunt, Chancellor Merkel has emerged as the new Iron Lady of Europe.
