Posted Jul 22, 2015 by Martin Armstrong
It was about 20 years ago when Wolfgang Schäuble, current German Finance Minister, wrote his paper on the danger in the Eurozone reflecting on European policies, even describing his tough behavior towards Greece. Schäuble is the politician who has done much to shape contemporary Germany, and his falling out with Helmut Kohl remains alive and well to this day.
The key point in the paper produced by Wolfgang Schäuble and Karl Lamers in 1994, who were of then the ruling CDU/CSU parliamentary majority in the German parliament, called for a “quasi-constitutional document” based on the model of a federal state. He proposed that the European Parliament should have “the character of a legislative body and [enjoy] equal rights with the Council”. The Council of Ministers should be “called upon to assume, in addition to other tasks belonging essentially to the inter-governmental sphere, the role of the second chamber, that is to say of the house of member states, with the Commission exercising the attributes of a European government.”
The competences of the Union and the member states would be subject to the principle of subsidiarity; they would be reviewed and some would have to be given back to the member states. This was a rather boilerplate federalism structure, yet what was critical and largely overlooked, perhaps intentionally, was the political statement which explains Schäuble’s hard-line position with Greece. The political message stated the need to maintain the Franco-German relationship as the leading role in the enlarging Union. The Schäuble-Lamers paper proposed a “hardcore” Europe, in which a group of countries based around France and Germany would coordinate their policies in order to lead the Union as a whole. However, this core grouping would not establish specific institutional arrangements beyond those already operating in the broader Union.
Many Europeans are starting to see a very hard-line German position championed by Schäuble, which they are characterizing behind the curtain as a more selfish edge by demanding painful measures from Athens and resisting any firm commitment to granting the Greek relief from crippling debt, despite the fact that it was such debt relief that enabled Germany to recover. Yet the position of Schäuble from the outset was his vision that the other nations must coordinate with the core, of which the other nations were not actually regarded.
That perception of a selfish Germany has been fueled by Schäuble’s statement suggesting that Greece would get its best shot at a substantial cut in its debt ONLY if it was willing to give up membership in the European common currency. Schäuble is expected to take his tough stance once again with the next crash candidate. For many, that appears to be Italy, which is now considered the greatest risk within Euroland. Yet, his views are spelled out in his 1994 paper.
Schäuble seems to have foresaw the crisis back in 1994, distinguishing between core members and non-core members. Therefore, his thinking is quite different from that of France. Paris has jumped the gun after the Greece disaster and now want a core Europe push, but clearly with Italy as a full-fledged member into a new federalized Europe.
Behind the curtain, the federalization of Europe is the ultimate goal, although politicians always denied that in front of the curtain. The curtain is starting to be drawn, but the equal federalization of Europe was never part of the German mindset. There seems to be a conflict emerging between Germany and France because France wiped out its economy with insane taxation. It too will fall in this next downward cycle.
*(Wolfgang Schäuble and Karl Lamers, “Reflections on European Policy”. Bonn: CDU/CSU Group, 1994).