Eurasia

Download the Eurasia Daily News Summary for May 31, 2013.
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REACHING A CLIMAX: THE BATTLE BETWEEN GERMANY’S SOVEREIGNTY AND THE EUROZONE

 

BLUF:

European Union (EU) members at The Eurozone Conference held in Brussels June 28-29 have agreed to create a permanent bailout system fund called the European Stability Mechanism (ESM). However, Germans are wary of Chancellor Angela Merkel’s swift support of the ESM given that this is another decision made without consulting the Bundenstag (German parliament).  As Germany’s stable economy becomes the strategic cornerstone of eurozone solvency, EU dependence on German funding for the bailout poses a potential threat to the country’s sovereignty.

OBSERVED:  

Before the Eurozone summit, Merkel re-enforced her resolve to maintain economic austerity measures but backed off her position during the summit, agreeing to allocate significant resources to solve the euro crisis. Germans, not surprisingly, are skeptical of her switch. The new legislation, the ESM, allows private banks to directly access bailout funds without government approval. The agreement also establishes a fiscal compact or a system of restraints on  each country’s budget.    The German newspaper, Spiegel Online reported that “Reactions back home [Germany] were devastating… in fact, the vehemence of the attacks seems to have taken even Merkel’s advisers by surprise.” German frustrations are growing with the steady increase of bailout funds required by Eurozone nations (such as Greece, Spain, Italy and Cyprus)

As Germany assumes greater financial responsibility for maintaining the EU, Germans worry about diminishing national sovereignty; and view Merkel’s decision to support the ESM’s as evidence supporting their fears. While the German parliament approved of the EU legislation last Friday (June 29), Joachimn Gauck, Germany’s president will not sign the legislation into law until the Constitutional Court signs off.  Germany, without a swift ruling, will likely miss the July 9 deadline when the Eurozone plan takes effect. Regardless of the constitutional court’s decision, new money may not be available to finance the EU project until the end of 2012.

Germany’s decision between extending integration with the EU or placing limits on involvement will determine their national course. The Constitutional Court’s upcoming ruling will be a key indicator revealing possible directions. The court has two options: first, the court could approve the new EU plan, but require more involvement from the upper and lower houses of the German parliament; second, the court may defer a decision, refusing to approve the EU plan without a national referendum amending the German constitution. This second option would be the first national referendum since Hitler’s era.

ASSESMENT:

[-]: As Merkel dedicates Germany’s financial resources to saving the EU, Germans worry that their sovereignty is threatened.  Although Germany is the most financially stable country in the EU–and is not opposed to aiding other Europeans– resolve is weakening. Germany has bailed out Greece on multiple occasions, with limited long-term success.  Because Germany’s economic strength and resilience can exist independent of the Euro, national support for Merkel’s Eurozone agenda fluctuates. The Bundestag’s willingness to underwrite EU debt waivers, particularly when debtor Euro nations, plagued with internal corruption, make long term economic reforms difficult if not impossible

Germans are wondering if this round of Eurozone summits will produce long-term solutions for EU preservation while still maintaining German sovereignty.  These new policies might be a harbinger of a future European state, wherein country sovereignty is dissolved (or significantly diminished). Germany will not tolerate this outcome. Merkel and the German nation are on a collision course between the competing interests of maintaining the single-currency Eurozone and protecting German national interests and independence.  Angela Merkel may try to straddle both positions but pragmatically will be forced to take a side. If popular opinion in Germany is an indication, the eurozone will lose.

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