Will Europe Let Germany Lead?

BERLIN – The United Kingdom’s Brexit vote, Italian Prime Minister Matteo Renzi’s referendum defeat and subsequent resignation, and Donald Trump’s election as President of the United States have created a power vacuum in the West, and in Europe. At a time when Europe needs to make important collective economic and foreign-policy decisions, domestic issues are preoccupying larger European Union member states such as France, the UK, Spain, and Italy. Consequently, there is growing pressure on German Chancellor Angela Merkel and her government to step up and lead.

But while Germany wants to show leadership, it needs European partners who are willing to engage and compromise. Germany’s critics are right to say that it could be more open to other member states’ policy proposals, but many of the complaints leveled against Germany have been unfair – and often self-serving.

For example, the German government has been accused of shunning European solidarity in response to the 2008 financial crisis. But, while German measures have sometimes come too late, or been ill-conceived – such as its “temporary Grexit” proposal – Germany’s government has also agreed to numerous bailout programs, the creation of the European Stability Mechanism, and an EU banking union. What’s more, Germany has borne the largest financial burden.

Germany has also been criticized for not agreeing to underwrite Eurobonds, and for opposing a transfer union. But these arguments have not always been made in good faith: member states such as France want to share risk without ceding sufficient sovereignty over economic policymaking. Germany’s government and citizens are more open than most to the deeper integration required to make the euro sustainable, including fiscal union. But, to achieve that, all partners need to move forward, in terms of sharing policy sovereignty and risk.

A third complaint made against Germany is that it engages in beggar-thy-neighbor behavior, by pursuing restrictive fiscal policies that have created an excessive current-account surplus of close to 9% of GDP. This has indeed been a mistake. But it is Germany’s problem, first and foremost. While Germany has a large investment gap that hurts domestic productivity and growth, it is not the main culprit behind tepid growth, high unemployment, low competitiveness, and other economic ills elsewhere in Europe.

Admittedly, many German policymakers have been misguided in their obsession with fiscal austerity, and with their criticism of the European Central Bank’s monetary-policy approach. But they are justifiably frustrated with the slow pace of economic reform across the EU. Overall, Germans are deeply pro-European, and the German government has done more for Europe than it is given credit for.

Leadership mistakes are easy to identify and criticize in retrospect. A more constructive exercise is to judge decisions in the context of the information that was available at the time they were made, and to apply past lessons to future choices. With the benefit of hindsight, the German government – indeed, any government – would have acted differently with respect to the Greek debt crisis, fiscal policy, the Brexit referendum, and so forth. So, a fairer benchmark for German leadership is other large European governments’ own track records. Would Europe really be better off today if Germany’s government had followed the paths taken by its French, British, or Italian counterparts in recent years?

Even if Merkel was late in responding to the crises in Italy and Greece, she has also shown extraordinary tolerance, open-mindedness, and foresight. In two key areas – addressing the refugee crisis and confronting Russian aggression – her government has shown more European solidarity than most other member states.

Moreover, Merkel demonstrated sound leadership in her response to Trump’s victory. She congratulated him, and offered him a close working relationship, but only on the basis of “common values” such as “democracy, freedom, as well as respect for the rule of law and the dignity of each and every person.” She is also the most important, and the most sympathetic, partner for the UK government in the upcoming Brexit negotiations.

Merkel’s approval rating remains the envy of other European leaders, and she could be the last well-grounded, non-populist head of government among the larger Western countries. Italy’s December 4 constitutional-reform referendum may have been the final wake-up call for Europe to get its act together in order to address social divisions, political extremism, and deepening economic and political crises.

The German government should learn from its past mistakes, while continuing to step up as a leader for Europe. But it can’t do it alone. Other EU governments should stop bashing Germany as a way to deflect attention from their own failings. In recent years, their attacks have gone too far, and have been counterproductive. Germany needs its partners to come to the table, and to engage in a constructive dialogue about concrete solutions to Europe’s deepening crisis.