Brexit, beyond a doubt, shatters profound internal balances within the European Union and heightens Germany’s dominance. This is not necessarily good news, judged against the backdrop of the original EU design of carefully sustained balances that offset big countries’ dominance. The German unification in the 90s tilted the scales, initially more as a matter of perception than a tangible fact. On the one hand, Berlin was overwhelmed with internal unification challenges, while on the other hand, the influence of the United States and Britain counterbalanced German domination.
Many years have since passed, and the present day balance has shifted dramatically. Internal traction has declined and centrifugal forces have increased, with there being consecutive crisis peaks in the Eurozone. An accumulation of consecutive destructive impacts generated a perception of a chronic malaise and loss of momentum and even direction.
Britain’s exit further weakens the potential for balancing Germany’s domination over the EU’s future.
In fact, the original design of the European Union does not imply a dominant role for any single country. Rather, it is built on consensus building and shared interest – on mutual counterbalancing of excessive power belonging to an individual country, allowing each member a range of freedom in pursuit of national excellence. The birth of the EU was a rejection of previous patterns of balancing power through warring over national interests. The emergence of a unipolar German-centered EU poses serious impediments to future collective growth, creative energy and consensus dynamics across the continent.
The European Union has dramatically declined in its global standing, both in share of overall GDP and technology and innovation rankings vis-à-vis Asia and North America. While in 1990, the EU’s share of world GDP was 24%, last year, 2018, despite the increase in membership, the share dropped to 15%, and the trend is further downward. Consistent low economic average growth rates and lack of fiscal discipline, coherence and synergy in individual countries’ economic policies have triggered a declining trajectory, spelling stormy weather for the EU’s future. The worst scenario could be that the EU no longer provides the most competitive framework for national development, as individual members aim at joining the best global teams.
Even as the consolidated balance sheet of global wealth that the EU generates remains impressive, the lag behind the leading and trend-setting centers of the global economy and politics grows.
The EU is by and large absent from the newswire on cutting-edge technologies and industry breakthroughs in telecommunications, IT, artificial intelligence, education and military development. Particularly striking is Europe’s lag in the new generation of mobile communications. The EU has long had no significant global player in mobile devices, not to mention the infrastructure of the fifth generation of mobile communications.
Despite the scale of its economy and industrial traditions, the EU has widened the gap, trailing not only the United States, China and Japan, but even South Korea. Mobile connectivity is a key ingredient for a booming, integrated innovation and technology-intensive economy, as well as for eGovernment.
The lack of a catch-up strategy, while refusing to even acknowledge the problem, is most disturbing. Moreover, it is disturbing in light of China’s Xi’s designated strategy, “Made in China 2025”, which could allow Beijing to outperform key US high-tech sectors in fewer than 6 years. This may or may not happen, but Europe seems to have resigned from this global race, comfortable in its second or third-tier position, preferring to focus on global leadership in climate change policies.
The European Union has consistently been lagging in advanced defense technologies, which nominally translates in denigrated high-tech defense hard and software potential. The visible result is the absence of a fifth-generation European fighter, space-based military technology and autonomous military robot and drone systems, resulting in a greater dependence on defense imports. As of now, the lag seems irrecoverable. The lack of significant industrial and R&D spending in high-tech defense technology translates to an inferior civilian tech spin-off.
While the US has successfully mobilized private business and entrepreneurs to lead in space exploration and the development of new generations of space technologies, the European Union has stalled at the Ariana rocket and Airbus civil aviation tech level.
The EU does not even seem to be bothered that it has lost its IT industry sovereignty to US giants Amazon, Apple, Microsoft, Facebook and Google. EC anti-trust bodies imposing fines in the billions of euros for alleged abuse of dominant position by these US companies the can hardly be a substitute for lack of adequate sovereign capabilities.
Even in the sphere of traditional leadership, the automotive and pharmaceuticals industries, the European Union has lost its competitive edge. Leadership in the global climate debate has not translated into tangible economic benefits and a sustainable business offset. At present, the EU is behind in the most dynamic segment in the car market – the EVs.
There is also a significant and looming gap in the competitiveness of the EU transport sector in the fuel switch to LNG in long-haul transport and heavy trucks.
Even the claim for global leadership in climate change has lost its “backbone” – the economic and technological lead in CC-related technologies. Solar panels are now almost exclusively produced in China, including EV batteries, as China continues unabated to strengthen its control on the global rare-earth metals market.
Against this background, the cutting edge of climate change seems to hold water only insofar as restrictions on industries are concerned, including the levies of carbon tax and calls for higher CC targets that impair economic growth and living standards and virtually make it impossible to catch up with the global leaders – China and the United States.
And against this background, Germany’s marked domination of the EU political and economic agenda and its focus on internal domestic priorities over shared EU interests, spell more of the same laggard-type reactions at the EU level. Retaining a cutting edge in technological innovations and visionary strategy and leadership are the glue that can hold the EU together. The sense of backwardness and belonging to a power in decline might in time force countries to seek a way out and the pursuit of alternative group strategies with other global leaders.
Germany’s leadership within the EU does not translate in the EU’s global leadership drive. Berlin’s dominance in votes and influence and shaping mainstream EU decisions, including at the European Commission, often subdues better options for common and shared policies that are put forward by a more forward-looking minority of smaller countries. The Germanization of the European Commission, with the possible appointment of a German, Manfred Weber, to replace Jean-Claude Juncker, might further contribute to the Germanzation of the EU. Without adequate institutional checks and balances, Berlin could have a free hand in determining the EU agenda.
The problem is not that Germany does not have the right to prioritize its national interests, but that, by dominating the direction and the content of EU policies, it could sideline better non-German options. With the imbalance between German and Eurocentrism in Berlin’s policies, it could inflict disproportionately higher damage on the whole union, amplifying cracks and divisions and undermining consensus-building capacity and positive integration upgrades.
Something exemplifying such a threat is the self-centered commitment of Germany to proceed with Nord Stream 2, disregarding the loss-gains balance and the destructive effect on the EU gas market, while pursuing bilateral arrangements with Russia.
A further disquieting note is the total lack of consideration for the net EU impact of the German chancellor’s dedication to shut down nuclear and coal energy plants and engage in a speedier transition to renewables – with not a single trace of concern for cross-border ill effect. Higher electricity prices in Germany, which ostensibly could be borne by German consumers, ultimately impact EU electricity prices, raising the burden on other consumers and government budgets across the EU. The effect of this German-centered RES-focused policies is felt all over the European energy market, increasing energy poverty levels. And Berlin does not seem to care.
The fallout from Germany’s excessive leadership ambitions is not confined within its own borders. If Brexit goes ahead and London stops contributing to balancing off Berlin, then the chance of sub-optimal choices at EU levels rises exponentially. So does the cost of consensual policies. Merkel’s selfish call on refugees to flood the EU generated one of the worst crises in the modern history of the union.
Indirect but strong proof of the inadequacies of German-led immigration policies in the EU is the fact that Berlin’s actions are premised on the need for filling labor shortage gaps. A shrinking percentage of the newly arrived refugees opt for jobs in German industry; more join the rising group of social care beneficiaries. The cost of sustaining these policies reflects on a rising social budget that already exceeds Germany’s defense spending.
The cost of Berlin’s addiction to climate change-driven hikes in emissions quota prices could spell disaster across Europe. Not only could the fate of whole regions and industries be put at risk, but higher electricity prices could trigger higher inflation and reductions in living standards, especially in poorer and catching-up economies. None of this diktat could be referred to as a consensus or balanced-interest policy.
This line of self-centered national interest brought to EU level policy, invites easy followers, with France seeking to impose EU tax harmonization. This could deny EU member states fiscal sovereignty. In Paris’s interpretation, harmonizing taxes means other countries aligning their taxes with France’s record budget of 55 percent of GDP. No one in the French government would consider the option of the country harmonizing EU taxes at the lowest possible level. This is one more case of the bigger equals wiser mentality.
By appointing Manfred Weber as head of EC, Germany would expand its institutional dominance – the’Deutschland über Europäischen Union’ paradigm.
The EU does not need greater centralization and dominance by any single country, but a diffused yet well networked power and institutional base, which guarantees individual countries enough breathing space to excel and lead, while encouraging soft competition between governments on best policies and governance practices. The common denominator of EU policies should not be size, but rather merit.
The EU and its government – the European Commission – therefore need a group of visionaries and natural leaders at the top, who can work in tandem while pulling the union into higher orbits of global competition. Bureaucrats won’t do.